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Constitution of J&K is sovereign

J&K's constitution is sovereign The Times of India, Jul 18 2015

Saleem Pandit

In a landmark verdict amid fresh legal challenges to J&K's special status, the state high court on Friday ruled that J&K's constitution was “sovereign in character“ and its assembly exercised “sovereign power“ to legislate laws. Underlining that J&K's unique character couldn't be challenged or abridged, a bench of Justices Muzaffar Hussain Attar and Ali Md Magrey passed the ruling that the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act couldn't be extended to the state because Parliament couldn't make laws for J&K under Article 370. The court had clubbed various petitions of around 550 loan defaulters challenging jurisdiction of the Act. The ruling comes at a time when a thinktank has announced plans to challenge the constitutional validity of the Indian Constitution's Article 35 (A) that bars non-residents from buying property in J&K.

The court said the Article clarifies the existing constitutional and legal position.The court said the Act, enacted in 2002 and amended twice, “adversely impacts the inalienable property rights of state subjects. “The Act is made beyond legislative competence by Parliament to the extent of Jammu & Kashmir, and thus cannot be extended to this state, the court said.

“Any law made by Parliament which affects the laws made by the state legislature cannot be extended and applied to J&K. The court said the Act affects rights of state subjectscitizens state subjectscitizens recognized by the constitution of India and the state. It ruled that Parliament lacks competence to make laws regarding J&K, which would affect the interests of state subjects with regard to their immoveable properties. “It is the state in terms of section 5 of the constitution of J&K, which has the absolute sovereign power to legislate laws touching the rights of its state subjectscitizens and their immoveable properties. It said the sale of immoveable property in pursuance to a civil court decree obtained by a bankfinancial institution in respect of the mortgaged property cannot be made in favour of non-state subjects.The court said the power of Parliament to make laws in respect of J&K is thus circumscribed. “It can make laws for it only where permitted by the state and not otherwise, and that too in accordance with the mechanism prescribed by Article 370 of the constitution of India,“ the court said. SARFAESI Act was enforced on December 17, 2002, to regulate securitization and reconstruction of financial assets and enforcement of security interests. It was amended in 2004 and 2012 to ensure immediate recovery of finances or money due to financial institutions from borrowers. It empowers banks to seize immovable property of defaulters.

Does the state have sovereign powers?

J&K HC: SARFAESI cannot be enforced

The Times of India, Dec 18 2016

AmitAnand Choudhary 

Reminds HC Its People Are Indian Citizens First

Though Jammu & Kashmir enjoys special status under Article 370, it cannot claim sovereignty outside the Indian Constitution and its residents are “first and foremost“ citizens of India, the Supreme Court has ruled.

A bench of Justice Kurian Joseph and Justice R F Nariman set aside the judgement of J&K high court which had held that the state enjoyed sovereign powers to legislate in respect of laws touching the rights of its permanent residents with respect to their immovable properties.

The court said even though J&K had its own constitution, it cannot override provisions of the Indian Constitution. The bench ruled that J&K did not have sovereign powers and it was part of the country's federal structure.

“It is thus clear that the state of J&K has no vestige of sovereignty outside the Constitution of India and its own constitution is subordinate to the Constitution of India. It is therefore wholly incorrect to describe it as being sovereign in the sense of its residents constituting a separate and distinct class in themselves.The residents of J&K, we need to remind the high court, are first and foremost citizens of India,“ it said. “There is no reference to sovereignty . Neither is there any use of the expression `citizen' while referring to its people. The people of J&K for whom special rights are provided in the Constitution are referred to as permanent residents under Part III of the constitution of J&K... the constitution of J&K has been made to further define the existing relationship of the state with the Union of India as an integral part thereof,“ it said.

Referring to Section 10 of J&K constitution which says permanent residents of the state shall have all rights guaranteed to them under the Constitution of India, the bench said, “They are governed first by the Constitution of India and also by the Constitution of J&K...We have been constrained to observe this because in at least three places the HC has gone out of its way to refer to a sovereignty which does not exist.“

Rejecting the HC's contention that both Constitutions were expressions of the sovereign will of the people, the bench said matters of national importance were with the Centre and those of local concern with the state. “...There is no dual citizenship,“ it said.

The court passed the order on an appeal filed by the State Bank of India challenging the J&K high court's verdict that various provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, were outside the legislative competence of Parliament, as they would collide with Transfer of Property Act of J&K.

“It is rather disturbing to note that various parts of the judgement speak of the absolute sovereign powers of the state. It is necessary to reiterate that Section 3 of the Constitution of J&K, which was framed by a Constituent Assembly elected on the basis of universal adult franchise, makes a ringing declaration that the state of J&K is and shall be an integral part of the Union of India. And this provision is beyond the pale of amendment,“ the bench said.

SC: state does not enjoy sovereign powers

Tax Heal

J&K HC rules: SARFAESI can not be enforced

By CA Satbir Singh | October 9, 2015

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 cannot be enforced in the State of J&K

• The provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI ) 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.

FULL TEXT:

HIGH COURT OF JAMMU AND KASHMIR

Bhupinder Singh Sodhi

v.

Union of India

MUZAFFAR HUSSAIN ATTAR AND ALI MOHAMMAD MAGREY, JJ. OWP NOS. 1031 OF 2004 AND 530 OF 2007

JULY 16, 2015

P.N. Raina, Sr. Advocate. A. Haqani and M.A. Qayoom, Advs. for the Appellant. R.A. Jan, Ld. Advocate Z.A. Shah, Ld. Sr. Advocate Hanan, Adv. and S.A. Makroo Ld. ASGI for the Respondent.

JUDGMENT

Muzaffar Hussain Attar- 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 otherwise requires,–

(a) “Appellate Tribunal” means a Debts Recovery Appellate Tribunal established under sub-section (1) of section 8 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);

(b) “asset reconstruction” means acquisition by any securitization company or reconstruction company of any right or interest of any bank or financial institution in any financial assistance for the purpose of realization of such financial assistance;

(c) “bank” means-

(i) a banking company; or (ii) a corresponding new bank’ or (iii) the State Bank of India; or (iv) a subsidiary bank; or [(iva) a multi-State co-operative bank; or]. (v) Such other bank which the Central Government may, by notification, specify for the purpose of this Act; (d) “banking company” shall have the meaning assigned to it in clause ( c ) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);

(e)** ** ** (f) “borrower” means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who becomes borrower of a securitization company or reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance;

(g) & (h)** ** ** [(ha) “debt” shall have the meaning assigned to it in clause (g) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);

(i) “Debts Recovery Tribunal” means the Tribunal established under sub-section (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);

(j) “default’ means non-payment of any principal debt or interest thereon or any other amount payable by a borrower to any secured creditor consequent upon which the account of such borrower is classified as non-performing asset in the books of account of the secured creditor [***];

(k) “financial assistance” means any loan or advance granted or any debentures or bonds subscribed or any guarantees given or letters of credit established or any other credit facility extended by any bank or financial institution;

(l) “financial asset” means debt or receivables and includes—

(i) a claim to any debt or receivables or part thereof, or charge on, immovable property; or (ii) any debt or receivables secured by, mortgage of, or charge on, immovable property; or (iii) a mortgage, charge, hypothecation or pledge of movable property; or (iv) any right or interest in the security, whether full or part underlying such debt or receivables; or (v) any beneficial interest in property, whether movable or immovable, or in such debt, receivables, whether such interest is existing, future, accruing, conditional or contingent; or (vi) any financial assistance; (m) “financial institution” means—-

(i) a public financial institution within the meaning of section 4A of the Companies Act, 1956 (1 of 1956); (ii) any institution specified by the Central Government under sub-clause (ii) of clause(h) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993); (iii) the International Finance Corporation established under the International Finance Corporation (Status, Immunities and Privileges) Act, 1958 (42 of 1958); (iv) any other institution or non-banking financial company as defined in clause (f) of section 45-1 of the Reserve Bank of India Act, 1934 (2 of 1934), which the Central Government may, by notification, specify as financial institution for the purposes of this Act; (n) “hypothecation” means a charge in or upon any movable property, existing or future, created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance and includes floating charge and crystallization of such charge into fixed charge on movable property;

(o) “non-performing asset” means an asset or account of a borrower, which has been classified by a bank or financial institution as sub-standard, [doubtful or loss asset,

(a) in case such bank or financial institution is administered or regulated by any authority or body established, constituted or appointed by any law for the time being in force, in accordance with the directions or guidelines relating to assets classifications issued by such authority or body; (b) in any other case, in accordance with the directions or guidelines relating to assets classifications issued by the Reserve Bank;] (p) & (s)** ** ** (t) “property” means—-

(i) immovable property; (ii) movable property; (iii) any debt or any right to receive payment of money, whether secured or unsecured; (iv) receivables, whether existing or future; (v) intangible assets, being know-how, patent, copyright, trade mark, license, franchise or any other business or commercial right of similar nature; (u) & (z)** ** ** (zc) “secured asset” means the property on which security interest is created;

(zd) “secured creditor” means any bank or financial institution or any consortium or group of banks or financial institutions and includes—

(i) debenture trustee appointed by any bank or financial institution; or (ii) securitization company or reconstruction company, whether acting as such or managing a trust set up by such securitization company or reconstruction company for the securitization or reconstruction, as the case may be; or (iii) any other trustee holding securities on behalf of a bank or financial institution, in whose favour security interest is created for due repayment by any borrower of any financial assistance; (ze) “secured debt” means a debt which is secured by any security interest;

(zf) “security interest” means right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and includes any mortgage, charge, hypothecation, assignment other than those specified in section 31;”

8. Chapter II of the Act of 2002, deals with regulation of securitisation and reconstruction of financial assets of Banks/Financial Institutions. Chapter III, which is relevant for disposal of these writ petitions, deals with enforcement of security interest. It commences from section 13. The different sub sections of section 13 provide manner and method for speedy recovery of the secured interest. It also provides for taking over possession of secured assets of the borrower as also the management of the business of borrower with further right to transfer it by way of lease, assignment, or sale for realizing the secured assets. Section 13, which, is beset on all sides by the challenge thrown to it by the writ petitioners, is taken note of :

“13.Enforcement of security interest:

1. Notwithstanding anything contained in section 69 or section 69A of the Transfer of property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.

2. Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any installment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4).

3. The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.

[(3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate [within fifteen days] of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower;

Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under section 17 or the Court of District judge under section 17A.]

4. In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-

(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for releasing the secured asset; [(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset: Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt: Provided further that where the management of whole, of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security or the debt;] (c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor; (d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt. 5. Any payment made by any person referred to in clause (d) of sub-section (4) to the secured creditor shall give such person valid discharge as if he has made payment to the borrower.

[(5A) Where the sale of an immovable property, for which a reserve price has been specified, has been postponed for want of a bid of an amount not less than such reserve price, it shall be lawful for any officer of the secured creditor, if so authorized by the secured creditor in this behalf, to bid for the immovable property on behalf of the secured creditor at any subsequent sale.]

[(5B)Where the secured creditor, referred to in sub-section (5A), is declared to be the purchaser of the immovable property at any subsequent sale, the amount of the purchase price shall be adjusted towards the amount of the claim of the secured creditor for which the auction of enforcement of security interest is taken by the secured creditor, under sub-section (4) of section 13.]

[(5C)The provisions of section 9 of the Banking regulation act, 1949 (10 of 1949) shall, as far as may be, apply to the immovable property acquired by secured creditor under sub-section (5A).]

6. Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditors shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset.

7. Where any action has been taken against a borrower under the provisions of sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in rust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests.

8. If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.

9. In the case of financing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub-section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than [sixty per cent.] in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors:

Provided that in the case of a company in liquidation, the amount realized from the sale of secured assets shall be distributed in accordance with the provisions of section 529A of the companies Act, 1956 (1 of 1956):

Provided further that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts to realize his security instead of relinquishing his security and proving his debt under proviso to sub-section (1) of section 529 of the Companies Act, 1956 (1 of 1956), may retain the sale proceeds of his secured assets after depositing the workmen’ dues with the liquidator in accordance with the provisions of section 529A of that Act.

Provided also that the liquidator referred to in the second proviso shall intimate the secured creditors the workmen’s dues in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956) and in case such workmen’s due cannot be ascertained, the liquidator shall intimate the estimated amount of workmen’s dues under that section to the secured creditor and in such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimated dues with the liquidator:

Provided also that in case the secured creditor deposits the estimated amount of workmen’s dues, such creditor shall be liable to pay the balance of the workmen’s dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator: Provided also that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen’s dues, if any.

Explanation-………………

(10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower.

(11) Without prejudice to the rights conferred on the secured creditor under or by this section, the secured creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking any of the measures specified in clauses (a) to (d) of sub-section (4) in relation to the secured assets under this Act.

(12) No borrower shall, after receipt of notice referred to in sub-section (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor.”

9. Section 17(A) of the Act of 2002, provides for making of Application to the Court of District Judge in certain cases. This is a special provision made for the borrowers residing in the state of J&K. similarly section 18(B) provides for appeal to the High Court in certain cases, which appeal can be filed by the borrower residing in the State of J&K and who would be aggrieved by any order made by the Court of District Judge u/s 17(A). These provisions are also taken note of :

“17A. Making of application to Court of District judge in certain cases:-

In the case of a borrower residing in the State of Jammu & Kashmir, the application under section 17 shall be made to the Court of District Judge in that State having jurisdiction over the borrower which shall pass an order on such application.”

“18B. Appeal to High Court in certain cases:-

Any borrower residing in the State of Jammu & Kashmir and aggrieved by any order made by the Court of District Judge under section 17A may prefer an appeal, to the High Court having jurisdiction over such Court, within thirty days from the date of receipt of the order of the Court of District Judge:

Provided that no appeal shall be preferred unless the borrower has deposited, with the Jammu And Kashmir High Court, fifty percent. Of the amount of the debt due from him as claimed by the secured creditor or determined by the Court of District Judge, whichever is less:

Provided further that the High Court may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five percent. Of the debt referred to in the first proviso.”

10. Section 34 of the Act of 2002 provides that no Civil Court shall have jurisdiction to entertain any Suit or proceedings in respect of any matter, which a Debts Recovery Tribunal or Appellate Tribunal is empowered by or under the Act to determine and it further provides that no injunction shall be granted by the Court or any other Authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act of 2002 or Act of 1993. Section 34 is taken note of :

“34.Civil court not to have jurisdiction:-

No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993).”

11. Section 35 of the Act of 2002 provides that the provision of the Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or instrument having effect by virtue of any such law. Section 35 is also taken note of :

“35.The provisions of this Act to override other laws:-

The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.”

12. Section 36, which prescribes the period of limitation is also reproduced hereunder :

“36.Limitation.

No secured creditor shall be entitled to take all or any of the measures under sub-section (4) of section 13, unless his claim in respect of the financial asset is made within the period of limitation prescribed under the Limitation Act, 1963 (36 of 1963).”

13. Section 37 prescribes that the provisions of the Act of 2002 or rules made thereunder, are in addition to, and not in derogation of the laws, which are mentioned in the said section.

The said provision is taken note of :

37.Application of other laws not barred.-

The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956(1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force.”

14. Section 38 confers power on the Central Government to make rules. This provision is also taken note of :

“38.Power of Central Government to make rules:-

The Central Government may, by notification and in the Electronic Gazette as defined in clause (s) of section 2 of the Information Technology Act, 2000 (21 of 2000), make rules for carrying out the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:-

(a) the form and manner in which an application may be filed under sub-section (10) of section 13; (b) the manner in which the rights of a secured creditor may be exercised by one or more of his officers under sub-section (12) of section 13; [(ba) the fee for making an application to the Debts Recovery Tribunal under sub-section (1) of section 17; (bb) the form of making an application to the Appellate Tribunal under sub-section (6) of section 17; (bc) the fee for preferring an appeal to the Appellate Tribunal under sub-section (1) of section 18;] (c) the safeguards subject to which the records may be kept under sub-section (2) of section 22; (d) the manner in which the particulars of every transaction of securitization shall be filed under section 23 and fee for filing such transaction; (e) the fee for inspecting the particulars of transactions kept under section 22 and entered in the Central Register under sub-section (1) of section 26; (f) the fees for inspecting the Central Register maintained in electronic form under sub-section (2) of section 26; (g) any other matter which is required to be, or may be, prescribed, in respect of which provision is to be, or may be, made by rules. (3) Every rule made under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be mad, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.”

15. The Central Government, in exercise of powers conferred by sub section (1) and clause (b)(2) of section 38 read with sub section (4)(10) & (12) of section 13 of the Act of 2002, has framed rules called “The Security Interest (Enforcement) Rules 2002”.

16. The petitioners, in all the writ petitions, are those persons, who have borrowed money from different banks/financial Institutions and have hypothecated their properties in favour of the banks/financial Institutions.

17. The notices, u/s 13(2) of the Act of 2002, have been issued by the banks/secured creditors to the petitioners in respect of debt, which has been classified as Non Performing Asset, whereunder 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.

18. Section 13(4) 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).

19. All the writ petitioners have challenged the notices issued u/s 13(2) of the Act of 2002 on the grounds, which are broadly set out 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 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, does not authorize for making of law like the Act of 2002 by the Parliament in respect of the State of J&K ; (f) the limited extension of provision of the Constitution of India with further modifications, would make the Act of 2002 applicable to the country excepting the State of J&K ; (g) in presence of Suits, already instituted for recovery of debt, recourse cannot be had to the provisions of the Act of 2002 for recovering the same amount. 20. Mr. A.Haqani, learned counsel appearing for some of the writ petitioners, vehemently argued that the authority created and mechanism prescribed by the Act of 2002 is covered by the expression ‘administration of justice’ and the Parliament has no power to legislate any law in this behalf. Learned counsel, while referring to section 13 of the Act of 2002, was at pains to explain that the authority created and mechanism prescribed by section 13 of the Act of 2002, is in essence, a judicial authority, who is required to act judicially and this being the legal position, the Act of 2002 be declared illegal being beyond the legislative competence of the Parliament. Learned counsel referred to and relied upon the following judgments:-

1. Jaswant Sugar Mills Ltd. Meerut v. Lakshmi Chand and Ors reported in 1962 STPL(LE)2091 SC. 2. State of T.N. v. G.N.Venkataswamy and ors Etc.Etc. reported in 1994 STPL(LE)19294 SC. 3. . Associated Cement Companies Ltd., v. PN.Sharma and Another reported in 1964 STPL(LE)3022 SC. 4. Dev Singh and Ors v. The Registrar, Punjab and Haryana High Court, and Others reported in 1987 STPL(LE)13705 SC. 5. S.Ganapathraj Surana v. State of Tamil Nadu reported in 1992 STPL(LE) 16834 SC. 6. Sangram Singh v. Election Tribunal Kotah and Anr. reported in 1955 STPL(LE)678SC. 21. Mr. M.A.Qayoom, learned counsel appearing for some of the writ petitioners, invited attention of the Court to Article 370 of the Constitution of India and submitted that the mechanism prescribed in the said article for application of laws to the State of J&K, has not been followed. Learned counsel, while referring to article 370, submitted that clause B (i) of article 370 has restricted the power of Parliament, to make laws for the State of J&K, to those matters in the Union List and the Concurrent List, which, in consultation with the Government of the State, are declared by the President to correspond to maters specified in the Instrument of Accession. Learned counsel also referred to clause B(ii) of article 370 and submitted that other matters in the Union List may be applied to the State of J&K with concurrence of the Government of the State by the president, which may be specified by an order by the President. He further submitted that this constitutional mechanism has not been followed for application of law to the State of J&K. Learned counsel also referred to an Application/Affidavit filed by the State of J&K in a writ petition, filed in Jammu Wing of the Court and submitted that the State of J&K itself has raised objection in respect of enforcement of the Act of 2002 in the State of J&K. Learned counsel also referred to section 140 of the Transfer of Property Act, 1882 (a State Act) to indicate that application of the Act of 2002 has directly impacted the fields of legislation, for which laws can be exclusively made by the State legislature. Mr. Qayoom, in support of his contention, referred to and relied upon following judgments:-

1. S.Mubarik Shah Naqishbandi v. Income Tax Officer reported in AIR 1971 SC page 120. 2. Madan Mohan Choudhary v. State of Bihar & Ors reported in (1999) 3 Supreme Court Cases 396. 3. Prem Nath v. State of J&K reported in AIR 1959 Supre Court 749. 4. High Court of Judicature for Rajasthan v. P.P.Singh and anr., reported in AIR 2003 S.C.1029. 5. L&T Mcneil Ltd. v. Govt. of T.N reported in (2001) 3 Supreme Court Cases 170. 6. K.P.Mohapatra v. Ram Chandra Nayak reported in AIR 2002 Supreme Court 3578. 22. Other learned counsel, appearing for some other writ petitioners, made statement at the bar that they adopt the arguments, which were advanced by Mr. Haqani.

23. Mr. P.N.Raina, learned Senior Counsel, appearing on behalf of some writ petitioners, submitted that the expression ‘banking’ which appears in List – I, (Union List) at Entry 45 of 7th Schedule of the Constitution of India, would not authorize the Parliament to make a law like the Act of 2002 for effecting recovery of secured debt from the borrowers. Learned counsel, submitted that ours is a federal Constitution and the different limbs of the State have to confine their executive, legislative and judicial activities to the sphere of their delineated territorial, legal and constitutional jurisdictions. Learned counsel argued at great length by making reference to the decision of Hon’ble the Supreme Court, reported in 1970(1) SCC 248 in case titled Rustom Cavasjee Cooper, Petitioner v. Union of India, Respondent. He read the judgement in extenso to canvass his point that the expression ‘banking’ appearing in Entry 45 of List – I, of 7th Schedule of the Constitution of India, would not mean and connote making a law for recovery of debt amount from the borrowers. Learned counsel also referred to the Banking Regulation Act 1949 (for short Act of 1949), more particularly, sections 5&6 thereof to indicate that banking has been, for the first time, defined by the said Act of 1949 and it does not refer to recovery of the amount. Besides this, learned counsel referred to article 370 of the Constitution of India. Mr. Raina submitted that the Act of 2002 violates the federal structure of the Constitution of India and it is an intrusion upon the legislative powers of the State Legislature. Learned counsel submitted that the impact of the Act of 2002 has to be considered in the backdrop of federal structure of our Constitution. He further submitted that application of the Act of 2002 to the State of J&K, effectively violates the federal structure of the Constitution. Learned counsel also submitted that preceding the enactment of the Act of 2002, an ordinance was promulgated by the President of India in respect of scrutinization and reconstruction of financial assets, which ordinance was not made applicable to the State of J&K. Mr. Raina further submitted that the Central Government was conscious that such type of legislation would not be applicable to the State of J&K, which occupies a special position in the country. Learned counsel submitted that it is a sufficient indicator that the Act of 2002 would not be applicable to the State of J&K. learned counsel reiterated the argument, which was projected by M/s. Qayoom and Haqani that section 13 of the Act of 2002 has the potential of transferring the interests in the immoveable property of the State Subjects to Non State Subjects, as the bank is a juristic person and most of the banks, who are not banks of the State of J&K, whose Head Offices/Corporate Offices are located outside the State of J&K and whose Board of Directors comprises of Non State Subjects alone, it is not permissible, in view of the State laws, for them to create interest the immoveable property in the State of J&K. For the above stated reasons, more particularly, in the backdrop of article 370 of the Constitution of India, Mr. P.N.Raina, learned Senior Advocate, submitted that the Act of 2002 cannot be made applicable to the State of J&K. Learned counsel referred to the following judgments:-

1. [1969] 2 SCC 55 2. [1996] 3 SCC 709 3. 1953 SC 375 4. 1958 SC 560 5. 1959 SC 648 6. 1959 SC 749 7. 1969 J&K 77 8. 1970 J&K 77 9. 1970 SC 564 10. 1972 SC 1061 11. 1972 Kerala 27 12. 2000 SC 2181 13. 2002 SC 834 14. 2002 SC 1334 15. 2002 SC 1479/2002(4) SCC 274 16. 2004 SC 2371/2004(4) SCC 311 17. 2007 SC 712 24. Other learned counsel including the Senior Counsel, appearing in other cases, submitted at bar that they adopt the arguments advanced by Mr. P.N.Raina, Senior Counsel. .

25. One of the learned counsel submitted that his case be referred to the Legal Service Authority. Yet another learned counsel submitted that the Act of 2002 would not be applicable to the State of J&K, however, for recovery of advances, made by the bank outside the State of J&K, recourse can be taken to the Act of 2002

26. Mr. R.A.Jan, learned Advocate General, while referring to the Affidavit of State Authority, submitted that the State Government has taken cognizance of the issues involved in these cases. He further submitted that the State Government be given time to take final call on the subject.

27. Mr. Zafar A.Shah, learned Senior Advocate, appearing for J&K Bank, argued at great length. He submitted 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 Act of 2002. He further submitted that the Central Government has amended the Rules of 2002 and it has been prescribed that while enforcing the Act of 2002, the interests in the immoveable property can be transferred only in favour of the State subject. He also submitted that in view of the amendment made in the Rules of 2002, grievances of the petitioners stand redressed. Mr. Shah, while referring to article 370, submitted that in view of Constitution (Application to Jammu and Kashmir) Order of 1954 (C.O.48-S.R.O 1610 dated 14.05.1954) issued by the President of India, the Central Government has been authorized to legislate laws in respect of Entries in the List – I, (Union List) of 7th Schedule of the Constitution of India including entry 45, which Entry stands extended to the State of J&K in terms of the aforesaid constitutional order. He further submitted that it has been held by Hon’ble the Supreme Court, in case reported in (2009) 4 SCC 94 that the Act of 1993 as also Act of 2002 have been enacted in terms of Entry 45 of List – I, (Union List) of 7th Schedule of the Constitution of India. Learned counsel submitted that in view of the Authoritative Pronouncement of Hon’ble the Supreme Court, the issue that enactment fall within the purview of Entry 11(a) of List – III, (Concurrent List) of 7th Schedule of the Constitution of India, is rendered irrelevant. Mr. Shah also submitted that huge amounts have crystallized into Non Performance assets. He submitted that withholding of huge amounts by the borrowers is directly and adversely affecting the economic growth of the State of J&K. Learned counsel, in support of his contention, referred to and relied upon the following judgments:-

1. P.L.Lakhanpal v. State of J&K reported in AIR 1956 SC page 197 2. Mohd Subhan & Ors v. State reported in AIR 1956 J&K Page 1 3. Prem Nath Koul v. State of J&K reported in AIR 1959 SC page 749 4. Sampat Prakash v. State of J&K reported in AIR 1970 SC page 118 5. Jamaluddin v. Abu Saleh reported in 2003(4)SCC page 257 6. Indian National Congress v. Institute of Social Welfare and Ors reported in 2002(5)SCC page 685 7. Mardia Chemicals v. UOI reported in 2004(4) SCC page 311 8. State of Bombay v. Narottamdas reported in AIR 1951 SC 69 9. Central Bank of India vs. State of Kerala reported in 2009(4) SCC page 94 10. State of A.P v. MsDowell & Co. reported in 1996(3)SCC page 709 11. Sunanda Kumari v. Standard Chatered Bank reported in 2007 135 Compcas 604 Kar, ILR KAR 16 12. Abdul Aziz v. PNB reported in III(2006) BC 279 13. A. Venkatramani v. Housing Finance Ltd. dated 28.09.2006 14. M/s Transcore v. Union of India dated 29.11.2006 15. Delhi Bar Association v. UOI reported in 2002(4)SCC. 28. Mr. S.A.Makroo, learned Assistant Solicitor General of India submitted that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is valid and is capable of being enforced in the State of J&K. Learned counsel in support of his submission referred to the judgment titled Suganthi Suresh Kumar-Appellant v.Jagdeeshan-Respondent reported in 2002(1) Supreme 227.

29. Learned counsel, appearing for other respondent banks, in one voice, defended the Act of 2002. They submitted that the Act of 2002 does not impinge either upon the federal structure of Constitution or the State Constitution. Learned counsel referred to (2009) 4 SCC 94, more particularly, paragraph 36 thereto to show that Hon’ble the Supreme Court has already ruled that the Acts of 1993 and 2002 have been enacted by the Parliament under Entry 45 List – I, (Union List) of 7th Schedule of the Constitution of India. Learned counsel, accordingly, prayed for dismissal of the writ petitions.

30. In order to appreciate the contentions raised and submissions made at bar, it is deemed appropriate to take note of some of the relevant provisions of the Constitution of India, which have been made applicable to the State of J&K :

(a) By the Constitution (application to J&K) Order of 1954 (C-0-48-SRO 1610) ; Ministry of Law, New Delhi, 14th May, 1954 (for short order of 1954). (b) Article 14, 19(1) (7), 21, 35 A (amended in terms of Constitution Order) 256 (2), 368 (2), 152, 245, 246 (as applicable to the State of J&K in terms of constitutional order), Article 370 and section 140 of the Transfer of Property Act, 1882 and section 5 and 6 of the Constitution of J&K, List Ist and III of seventh schedule. “14. Equality before law The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.” “Right to freedom 19. Protection of certain rights regarding freedom of speech, etc.

(1) All citizens shall have the right-

(a) to freedom of speech and expression; (b) to assemble peaceably and without arms; (c) to form associations or unions; (d) to move freely throughout the territory of India; (e) to acquire, hold and dispose of property; and (f) to practice any profession, or to carry on any occupation, trade or business.” ……………………….. “[(7) The words “reasonable restrictions” occurring in clauses (2), (3), (4) and (5) shall be construed as meaning such restrictions as the appropriate Legislature deems reasonable.]”

“21. Protection of life and personal liberty

No person shall be deprived of his life or personal liberty except according to procedure established by law.”

“35 –A. Saving of laws with respect to permanent residents and their rights

Notwithstanding anything contained in this Constitution, no existing law in force in the State of Jammu and Kashmir, and no law hereafter enacted by the Legislature of the State,-

(a) defining the classes of persons who are, or shall be, permanent residents of the State of Jammu and Kashmir; or (b) conferring on such permanent residents any special rights and privileges or imposing upon other persons any restrictions as respects- (i) employment under the State Government; (ii) acquisition of immovable property in the State; (iii) settlement in the State; or (iv) right to scholarships and such other forms of aid as the State Government may provide, shall be void on the ground that it is inconsistent with or takes away or abridges any rights conferred on the other citizens of India any provision of this Part. “256 Obligation of States and the Union

(1)** ** ** (2) The State of Jammu and Kashmir shall so exercise its executive power as to facilitate the discharge by the Union of its duties and responsibilities under the Constitution in relation to that State; and in particular, the said State shall, if so required by the Union, acquire or requisition property on behalf and at the expense of the Union, or if the property belongs to the State, transfer it to the Union on such terms as may be agreed, or in default of agreement, as may be determined by an arbitrator appointed by the Chief Justice of India.”

“368. [Power of Parliament to amend the Constitution and procedure therefor]

(1)** ** ** (2) An amendment of this Constitution may be initiated only by the introduction of a Bill for the purpose in either House of Parliament, and when the Bill is passed in each House by a majority of the total membership of that House and by majority of not less than two-thirds of the members of that House present and voting, it shall be presented to the President who shall give his assent to the Bill and thereupon the Constitution shall stand amended in accordance with the terms of the Bill:

Provided that if such amendment seeks to make any change in-

(a) article 54, article 55, article 73, article 162 or article 241, or (b) Chapter IV of Part V, Chapter V of Part VI, or Chapter I of Part XI, or (c) any of the Lists in the Seventh Schedule, or (d) the representation of States in Parliament, or (e) the provisions of this article, the amendment shall also require to be ratified by the Legislature of not less than one half of the States by resolutions to that effect passed by those Legislatures before the Bill making provision for such amendment is presented to the President for assent.

[Provided further that no such amendment shall have effect in relation to the State of Jammu and Kashmir unless applied by order of the President under clause(1) of article 370.]”

(emphasis supplied)

“152. Definition

In this Part, unless the context otherwise, requires, the expression “State” does not include the State of Jammu and Kashmir.”

“245. Extent of laws made by Parliament and by the Legislatures of States

(1) Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or any part of the State. (2) No law made by Parliament shall be deemed to be invalid on the ground that it would have extra territorial operation.” “246. Subject matter of laws made by Parliament and by the Legislatures of States

(1) Notwithstanding anything in clauses ( 2 ), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the Union List) (2) Parliament, and, subject to clause ( 1 ), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the Concurrent List).” PART XXI

TEMPORARY, TRANSITIONAL AND SPECIAL PROVISIONS

370. Temporary provisions with respect to the State of Jammu and Kashmir.-

(1) Notwithstanding anything in this Constitution,-

(a) the provisions of article 238 shall not apply in relation to the State of Jammu and Kashmir;

(b) the power of Parliament to make laws for the said State shall be limited to-

(i) those matters in the Union List and the 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 the State to the Dominion of India as the matters with respect to which the Dominion Legislature may make laws for that State; and (ii) such other matters in the said Lists as, with the concurrence of the Government of the State, the President may by order specify. Explanation.- For the purposes of this article, the Government of the State means the person for the time being recognised by the President as the Maharaja of Jammu and Kashmir acting on the advice of the Council of Ministers for the time being in office under the Maharaja’s Proclamation dated the fifth day of March, 1948;

(c) the provisions of article 1 and of this article shall apply in relation to that State;

(d) such of the other provisions of this Constitution shall apply in relation to that State subject to such exceptions and modifications as the President may by order specify:

Provided that no such order which relates to the matters specified in the Instrument of Accession of the State referred to in paragraph (i) of sub-clause (b) shall be issued except in consultation with the Government of the State:

Provided further that no such order which relates to matters other than those referred to in the last preceding proviso shall be issued except with the concurrence of that Government.

(2) If the concurrence of the Government of the State referred to in paragraph (ii) of sub-clause (b) of clause (1) or in the second proviso to sub-clause (d) of that clause be given before the Constituent Assembly for the purpose of framing the Constitution of the State is convened, it shall be placed before such Assembly for such decision as it may take thereon.

(3) Notwithstanding anything in the foregoing provisions of this article, the President may, by public notification, declare that this article shall cease to be operative or shall be operative only with such exceptions and modifications and from such date as he may specify:

Provided that the recommendation of the Constituent Assembly of the State referred to in clause (2) shall be necessary before the President issues such a notification”

Section 140 of Transfer of Property Act.

“140. Exemptions of certain instruments from restriction imposed on transfer of immovable property.

Nothing contained in Irshad dated 29th Maghar, 1943, or any law, rule order, notification, regulation, hidyat, ailan, circular, robkar, yadasht, irshad, State Council resolution or any other instrument having the force of law prohibiting or restricting the transfer of immovable property in favour of a person who is not a permanent resident of the State shall apply to— 1[(a) a mortgage of immovable property other than land as defined in the Jammu and Kashmir Alienation of Land Act, Samvat 1995, in favour of—

(i) the life Insurance Corporation of India established under the life Insurance Corporation Act, 1956 ( 3 of 1956) and having an office for transacting the business in the State; or (ii) the Industrial Finance Corporation of India established under the Industrial Finance Corporation Act, 1948; or (iii) the Jammu and Kashmir State Financial Corporation established under the State Financial Corporation Act, 1951; or (iv) the Jammu and Kashmir Bank Ltd. or the Industrial Development Bank of India or a Bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 and having an office for transacting the business of banking in the State ;or (v) the Industrial Credit and Investment Corporation of India; or (vi) the Housing and Urban Development Corporation Ltd., New Delhi; or (vii) the Unit Trust of India; or 2[(viii) The Jammu and Kashmir Housing Board Constituted under the Jammu and Kashmir Housing Board Act, 1976;

Provided that in any suit based on such mortgage the mortgaged property shall be sold only to a permanent resident of the State;] 3[(aa) a simple mortgage of land in favour of –

(i) the Jammu and Kashmir Bank Ltd. or the Industrial Development Bank of India or a Bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 and having an office for transacting the business of banking in the State; or (ii) the Jammu and Kashmir State Financial Corporation established under the State Financial Corporation Act, 1956; or (iii) the Life insurance Corporation of India established under the Life Insurance Corporation Act, 1956; or (iv) the Industrial Finance Corporation of India established under the Industrial Finance Corporation Act, 11948; or (v) the industrial credit and Investment Corporation of India; or (vi) the Housing Urban Development Corporation ltd. new Delhi; or [(viii) The Jammu and Kashmir Housing Board constituted under the Jammu and Kashmir Housing Board Act, 1976;] 2[(ix) The Housing Development Finance Corporation Limited, 3[***], ]; or 4[(x) The Jammu and Kashmir Scheduled Castes and other Backward Classes Development Corporation Limited registered under the Companies Act, 1956]; or 5[(x) The Jammu and Kashmir Police Housing Corporation Ltd. Jammu/Srinagar. Provided that in any suit based on such mortgage the mortgaged land shall be sold only to permanent resident of the State, who is a member of an agricultural class for purposes of the Jammu and Kashmir Alienation of Land Act, Svt. 1995];

(b) a transfer of immovable proper situate at Katra and the village contiguous to it in favour fo the Vishwayatan Yogashram, a Society registered under the Societies

Registration Act, 1860 (Central Act. No. 21 of 1860) effected in furtherance of the declared purpose of the Society;

1[(c) a transfer of immovable property in favour of Sher-i-Kashmir National medical Institute Trust Srinagar;]

2[(d) a transfer of immovable property situate in District Udhampur acquired or requisitioned on behalf and at the expense of the Union, in favour of National Hydro Electric power Corporation Limited for construction , commissioning, running and maintenance of the Salal

Hydro Electric Project;]

3[(e) a transfer of immovable property by the Government in favour of:-

(i) the Jammu and Kashmir Tourism Development Corporation ltd.; (ii) the Jammu and Kashmir Industries Ltd.; (iii) the Jammu and Kashmir Minerals Ltd.; (iv) the Jammu and Kashmir State Industrial Development Corporation ltd.; (v) the Jammu and Kashmir handicrafts (Sale and Export) Corporation Ltd.; (vi) the Jammu and Kashmir Road Transport Corporation Ltd.; (vii) the Jammu and Kashmir Agro Industries Corporation Ltd.; (viii) the Jammu and Kashmir Projects Construction Corporation Ltd.; (ix) the Jammu and Kashmir Bank Ltd.; 4[(f) a simple mortgage of immovable property in favour of –

(i) Hindustan Machine Tools, Watch Factory, Zainakote, Srinagar; (ii) Oriental Insurance Company Limited, having an office for transacting the business in the State; (iii) New India Assurance Company Limited, having an office for transacting the business in the State; (iv) National Insurance Company Limited, having an office for transacting the business in the State; or (v) Indian Telephone Industries Limited, Hyderpora, Srinagar. By their employees respectively, who are permanent residents of the State, for obtaining loan for construction or purchase of residential accommodation in the State.

Provided that in any suit based on such mortgage, the mortgaged property shall be sold only to a permanent resident of the State];

1[(g) a transfer of immovable property in favour—

(i) Sher-i-Kashmir University of Agriculture Science and Technology, established and incorporated under the Sher-i-Kashmir University of Agricultural Science and Technology Act, 1982, in furtherance of the objects of the university; (ii) Jammu and Kashmir Small Scale Industries Development Corporation Limited and Jammu and Kashmir State Industrial Development Corporation (State owned Corporations) for Industrial development in the state]; 2[(iii) Jammu and Kashmir Cable Car Corporation Ltd.; 3[(iv) The Jammu and Kashmir Bank ltd.’ 4[(v) the Jammu and Kashmir State Power Development Corporation Limited.] 1[(h) a simple mortgage of immovable property executed or created in favour of a public financial institution, as specified in section 4-A of the Companies Act, 1956, a Scheduled bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 and the Trustees for the holders of debentures to secure the loans, guarantees, issue of debentures or other form of financial assistance provided for developmental projects in the State of Jammu and Kashmir Like Baghliar Project of Jammu and Kashmir State Power Development Corporation Limited.

Provided that in any suit based on such mortgage, the mortgaged property shall be sold or transferred only to a 2[a permanent resident of the State or any financial institution or corporation managed and owned by the Government of India];]

3[ (i) a lease of immovable property in favour of (i) Shri Mata Vaishno Devi University established under the Jammu and Kashmir Shri Mata Vaishno Devi University Act, 1999; and (ii) Baba Ghulam Shah Badshah University established under the Jammu and Kashmir Babab Ghulam shah for fulfillment of the objectives of the University.]” “67- Rights to foreclosure or sale

In the absence of a contract to the contrary, the mortgagee has, at any time after the mortgage-money has become 1[due] to him, and before a decree has been made for the redemption of the mortgaged property, or the mortgage-money has been paid or deposited as hereinafter provided, a right to obtain from the Court 2[a decree] that the mortgagor shall be absolutely debarred of his right to redeem the property, or 2[a decree] that the property be sold.

A suit to obtain 2[a decree] that a mortgagor shall be absolutely debarred of his right to redeem the mortgaged property is called a suit for foreclosure. Nothing in this section shall be deemed— 3[

(a) to authorise any mortgagee other than a mortgagee by conditional sale or a mortgagee under an anomalous mortgage by the terms of which he is entitled to foreclose, to institute a suit for foreclosure, or an usufructuary mortgagee as such or a mortgagee by conditional sale as such to institute a suit for sale; or] (b) to authorise a mortgagor who holds the mortgagee’s rights as his trustee or legal representative, and who may sue for a sale of the property, to institute a suit for foreclosure; or (c) to authorise the mortgagee of a railway, canal, or other work in the maintenance of which the public are interested, to institute a suit for foreclosure or sale; or (d) to authorise a person interested in part only of the mortgage-money to institute a suit relating only to a corresponding part of the mortgaged property, unless the mortgagees have, with the consent of the mortgagor, severed their interests under the mortgage.” Section 67-A of Transfer of Property Act.

“67-A Mortgagee when bound to bring one suit on several mortgages.

A mortgagee who holds two or more mortgages executed by the same mortgagor in respect of each of which he has a right to obtain the same kind of decree under section 67, and who sues to obtain such decree on any one of the mortgages, shall, in the absence of a contract to the contrary, be bound to sue on all the mortgages in respect of which the mortgage-money has come due.”

“HIREDITARY STATE SUBJECT

New entrant into State service to be Hereditary State Subject—Definition of “Hereditary State Subject”.

(Private Secretary’s circular order dated 31st January, 1927, published in Government Gazette dated 26th Magh, 1983).

High Highness the Maharaja Bahadur has been pleased to command that in future in the case of every new entrant into State service, the authority empowered to make the appointment should certify that he has satisfied himself after due enquiries that the persons appointed is a hereditary State subject. Further, that in the absence of such a certificate the Accountant General should not pass the pay bill of such State servant without the definite orders of His Highness in Council to the contrary.

For the purposes of this Order the term “hereditary State Subject” will be held to mean and include all persons born and residing within the State before the commencement of the reign of His Highness the late Maharaja Gulab Singh Sahib Bahadur and also persons who settled therein before the commencement of Samvat 1942, and have since been permanently residing therein. The certificate will be given after due enquiry by the Deputy Commissioner in whose charge the candidate for State service resides and the form of such certificate should be submitted by the Accountant General for the approval of His Highness in Council. In the meantime this order will have effect from the date of issue, namely 31st January, 1927. “

Section 5 & 6, 76 of The Jammu and Kashmir Constitution Act, 1996(1939 A.D) (for short 1939 AD)

“5. His Highness Inherent powers-

Notwithstanding anything contained in this or any other Act, all powers, legislative, executive and judicial, in relation to the State and its government are hereby declared to be and to have always been inherent in and possessed ad retained by His Highness and nothing contained in this or any other Act shall affect or be deemed to have affected the right and prerogative of His Highness to make laws, and issue proclamations, orders and ordinances by virtue of his inherent authority.”

THE EXECUTIVE

“6. Vesting of the civil administration in the council- Subject always to the provisions of sections 4 and 5 and subject also to such rules of business and allocation of portfolios and such other directions as to consultations with or reports to and confirmation by His Highness on special matters as His Highness may give from time to time by general or special orders in that behalf, the superintendence, direction and control of the civil administration and government of the State shall be vested in the Council.”

“76. Repeal and saving of Laws and rules- (1) The Regulations specified in Schedule V are hereby repealed to the extent shown in the third column of the said Schedule.

(2) Notwithstanding the repeal of Regulation 1 of 1991 but subject to the other provisions of this Act, all the law in force in the State immediately before the commencement of this Act shall continue in force until altered or repealed or amended by competent authority.

(3) All notifications published, proclamations issued, powers conferred, jurisdiction vested, forms prescribed, local limits defined, and orders, rules and appointments made under any Regulations, Order, Law or Rule, hitherto in force, which are in force immediately before the coming into operation of this Act d which are not inconsistent with any of the provisions of this Act, shall be deemed to have been respectively published, issued, conferred, vested, prescribed, defined and made under this Act and shall remain in force until repealed or modified either expressly or by implication by competent authority.”

Section 5 and 6 of Constitution of J&K:

“5. Extent of executive and legislative power of the State- The executive and legislative power of the State extends to all matters except those with respect to which Parliament has power to make laws for the State under the provisions of the Constitution of India.”

“6. Permanent residents (1) Every person who is, or is deemed to be, a citizen of India under the provisions of the Constitution of India shall be a permanent resident of the State, if on the fourteenth day of May, 1954—

(a) he was a State Subject of Class I or of Class II; or (b) having lawfully acquired immovable property in the State ,he has been ordinarily resident in the State for not less than ten years prior to that date. (2) Any person who, before the fourteenth day of May, 1954, was a State Subject of Class I or of Class II and who having migrated after the first day of March, 1947, to the territory now included in Pakistan, returns to the State under a permit for re-settlement in the State or for permanent return issued by or under the authority of any law made by the State Legislature shall on such return be a permanent resident of the State.

(3) In this section, the expression “State Subject of Class I or of Class II” shall have the same meaning as the [State Notification No. I-L/84 dated the twentieth April, 1927, read with State Notification No. 13/L dated the twenty-seventh June, 1932].”

31. In view of the significant constitutional issues raised as also for answering those issues, it becomes necessary to delve, to some extent, into the historical and constitutional development of the relations between the State of J&K and the Union. In this regard, Hon’ble the Supreme Court has referred to these developments in its decision reported in AIR 1959 SC 749 in case titled Prem Nath Koul versus State of J&K. The apex Court has taken cognizance of necessary developments from paragraph 6 to 21. However, paragraphs 6 to 15, which are relevant for the present cases, are taken note of :

“(6) In dealing with this appeal it is necessary to narrate in some detail the events which took place in Kashmir and the constitutional changes which followed them in order to appreciate fully the background of the impugned legislation. A clear under standing of this background will help us to deal with the appellant’s case in its proper perspective. In 1925 Maharaja Hari Singh succeeded Maharaja Pratap Singh as the Rule of Kashmir. It appears that for some time prior to 1934 there was public agitation in Kashmir for the establishment of responsible government. Presumably as a sequel to the said agitation Maharaj Hari Singh issued Regulation 1 of 1991 (1934). The Regulation began with the statement of policy that it was the declared intention of the Maharaja to provide for the association of his subjects in the matter of legislation and the administration of the State and that it was in pursuance of the said intention that the Regulation was being promulgated. This Regulation consisted of 46 sections which dealt with the legislative, executive and judicial power of the Maharaja himself referred to the subjects which should be reserved from the operation of the Regulation, made provision for the constitution of the Legislature of the State, conferred authority on the Council to make rules for specified purposes and referred to other relevant and material topics. It is relevant to refer to only two sections of this Regulation. Section 3 provides that all powers legislative, executive and judicial in relation to the State and its government are hereby declared to be ,& to have been always, inherent in possessed and retained by His Highness the Maharaja of Jammu and Kashmir and nothing contained in the Regulation shall affect or be deemed to have affected the right prerogative of His Highness to make and pass regulations, proclamations & ordinances by virtue of his inherent power. Section 30 lays down that no measure shall be deemed to have been passed by the Praja Sabha until and unless His Highness has signified his assent thereto. The Regulation leaves it to the absolute discretion of His Highness whether to assent to such a measure or not.”

“(7) Five years later the Maharaja promulgated the Jammu and Kashmir Constitution Act 14 of 1996 (1939). From the preamble to this constitution it appears that, before its promulgation, the Maharaj had issued a proclamation on 11-2-1939, in which he had announced his decision as to the further steps to be taken to enable his subjects to make orderly progress in the direction of attaining the ideal of active co-operation between the executive and the Legislature of the State in ministering to the maximum happiness of the people. In accordance with this desire the text of the Constitution contained in Regulation 1 of 1991 was thoroughly overhauled and an attempt was made to bring the amended text into line with that of similar Constitutions of its type. This constitution is divided into six parts and includes 78 sections. Part 1 introductory. Part 2 deals with the executive; Part 3 with the Legislature; Part 4 with the Judicature; part 5 contains miscellaneous provisions; and Part 6 provides for repeal and saving and includes transitional provisions. It is significant that S. 5 of this Act, like S. 3 of the earlier Regulation, recognises and preserves all the inherent powers of His Highness, while S. 4 provides that the State was to be governed by and in the name of His Highness, and all rights, authority and jurisdiction which appertain or are incidental to by His Highness except in so far as may be otherwise provided by or under the Act or as may be otherwise directed by His Highness. The other provisions of the Act are all subject to the overriding powers of His Highness specifically preserved by S. 5. As we will point out later on, in substance the Constitutional powers of the Maharaja under the present Act were exactly the same as those under the earlier Act.”

“(8) While the State of Jammu and Kashmir was being governed by the Maharaja and the second Constitution as amended from time to time was in operation, political events were moving very fast in India and they culminated in the passing of the Indian Independence Act, 1947, Under S. 7(1)(b) of this Act the suzerainty of His Majesty over the Indian States lapsed and with it lapsed all treaties and agreements in force at the date of the passing of the Act between His Majesty and the Rulers of the Indian States, all obligations of His Majesty existing at that date towards Indian States or the Rulers thereof, and all powers, rights, authority or jurisdiction exercisable by His Majesty at that date in or in relation to Indian States by treaty, grant, usage, sufferance or otherwise. The proviso to the said section, however, prescribed that, notwithstanding anything in para (b), effect shall, as nearly as may be, continue to be given to the provisions of any such agreement as therein referred to in relation to the subjects enumerated in the proviso or other like matters until the provisions in question are denounced by the Ruler of the Indian State on the one hand or by the Dominion or Province concerned on the other hand, or are sup[seeded by subsequent agreements. Thus, with the lapse of British paramountcy the State of Jammu and Kashmir, like the other Indian States, was theoretically free from the limitations imposed by the said paramountcy subject to the provisions of proviso just mentioned.”

“(9) On 22-10-1947, the tribal raiders invaded the territory of the State; and this invasion presented a problem of unprecedented gravity before the Maharaja. With the progress of the invading raiders the safety of the State was itself in grave jeopardy and it appeared that, if the march of the invaders was not successfully resisted, they would soon knock at the doors of Srinagar itself. This act of aggression set in motion a chain of political events which ultimately changed of history and political constitution of Kashmir with unexpected speed”.

“(10)On 25-10-1947, the Maharaja signed an Instrument of Accession with India which had then become an Independent Dominion By the first Clause of the Instrument the Maharaja declared that he had acceded to the Dominion of India with the intent that the Governor-General of India, the Dominion, Legislature, the Federal Court and any other Dominion Authority established for the purpose of the Dominion shall, by virtue of the Instrument of Accession, subject always to the terms thereof and for the purpose only of the Dominion, exercise in relation to the State of Jammu and Kashmir such functions as may be vested in them by or under the Government of India Act, 1935, as in force in the Dominion of India on 15-8-1947.”

“(11) We may usefully refer to some other relevant clauses of this Instrument. By cl. 3 the Maharaja agreed that the matters specified in the Schedule attached to the Instrument of Accession were the matters with respect to which the Dominion Legislature may make laws for this State. Clause 5 provides that the Instrument shall not be varied by any amendment of the Government of India Act, 1935, or of the Indian Independence Act, 1947, unless such amendment is accepted by the Maharaja by an Instrument supplementary to the original Instrument of Accession. By cl. 7 it was agreed that the Maharaja would not be deemed to be committed to the acceptance of any future Constitution of India nor would his discretion be fettered to enter into agreements with the government of India under any such future constitution. Clause 8 is very important. It says that nothing in the Instrument effects the continuance of the Maharaja’s sovereignty in and over his State, or , save as provided by or under the Instrument, the exercise of any powers, authority and rights then enjoyed by him as ruler of the State, or the validity of any law then in force in the Sate. The Schedule attached to the Instrument refers to four topics, defence, external affairs, communications and ancillary, and under these topics twenty matters have been serially enumerated as those in respect of which the Dominion Legislature had the power to make laws for the State. Thus, by the Instrument of Accession, the Maharaja took the very important step of recognising the fact that his State was a part of the Dominion of India.”

“(12) Meanwhile, the invasion of the State had created tremendous popular fervour and patriotic feelings in resisting the act of aggression and this popular feeling inevitably tended to exercise pressure on the Maharaja for introducing responsible and popular government in the State. The Maharaja tried to pacify the popular demand by issuing proclamation on 05-3-1948. By this proclamation he stated that in accordance with the traditions of his dynasty he had from time to time provided for increasing association of his people with the administration of the State with the object of realising the goal of full responsible government at as early a date as possible, and he added that he had noted with gratification and pride the progress made so far and the legitimate desire of his people for the immediate establishment of a fully democratic constitution based on adult franchise with hereditary Ruler from his dynasty as the constitutional head of an executive responsible to the Legislature. It appears that before this proclamation was issued the Maharaja had already appointed Sheikh Mohammad Abdullah who was then the popular leader of the people as the head of the emergency administration. By the proclamation the Maharaja replaced the emergency administration by a popular interim government and provided for its powers, duties and functions pending the formation of a fully democratic constitution. Clause 1 of the proclamation provides for the composition of the Ministry, whereas by cl. 2 the Prime Minister and other ministers are required to function as cabinet and act on the principle of joint responsibility. A Dewan appointed by the Maharaja is to be a member of the Cabinet. Clause 4 provides that the Council of Ministers shall take appropriate steps, as soon as restoration of normal conditions has been completed, to convene a National Assembly based on adult franchise having due regard to the principle that the number of representatives from each voting area should, as far as practicable, be proportionate to the population of that area. Clause 5 then lays down that the Constitution to be framed by the national Assembly shall provide adequate safeguards for the minorities and contain appropriate provisions guaranteeing freedom of conscience, freedom of speech and freedom of assembly. Clause 6 states that when the work of framing the Constitution is completed by the National Assembly the Constitution would be submitted through the Council of Ministers to the Maharaja for his acceptance. The proclamation ended with the expression of hope that the formation of a popular interim government and the inauguration in the near future of a fully democratic Constitution would ensure the contentment, happiness and the moral and material advancement of the people of the State. Though under this proclamation a popular interim government was set up, the constitutional position still was that the popular government had theoretically to function under the Constitution of 1939. It appears that before the popular government was thus installed in office the Maharaja had deputed four representatives of the State to represent the State in the Constituent Assembly called in the Dominion of India to frame the Constitution of India.”

“(13) After the popular interim government began to function the political events in the State gathered momentum and the public began to clamour for the framing of a democratic Constitution at an early date. When the atmosphere in the State was thus surcharged the Maharaja issued his final proclamation on 20-6-1949,by which he entrusted to Yuvaraj Karan Singh Bahadur all his powers and functions in regard to the government of the State because he had decided for reasons of health to leave the State for a temporary period. “Now therefore I hereby direct and declare”, says the proclamation, “all powers and functions whether legislative, executive or judicial which are exercisable by me in relation to the State and its government including in particular my right and prerogative of making laws, of issuing proclamations, orders and ordinances, or remitting, commuting or reducing sentences and of pardoning offenders, during the period of my absence from the State, be exercisable by Yuvaraj Karan Singh Bahadur.” As subsequent events show this was the last official act of the Maharaja before he left the State.”

“(14) After Yuvaraj Karan Singh took the Maharaja’s place and began to function under the powers assigned to him by the said proclamation, the interim popular government installed earlier was functioning as before. On November, 25, 1949, Yuvaraj Karan Singh issued a proclamation by which he declared and directed that the Constitution of India shortly to be adopted by the Constituent Assembly of India shall, in so far as it is applicable to the State of Jammu and Kashmir, govern the constitutional relationship between the State and the contemplated Union of India and shall be enforced in the State by him, his heirs and successors in accordance with the tenor of its provisions. He also declared that the provisions of the said Constitution shall, as from the date of its commencement, supersede and abrogate all other constitutional provisions inconsistent therewith which were then in force in the State. The preamble to this proclamation shows that it was based on the conviction that the best interests of the State required that the constitutional relationship established between the State and the Dominion of India should be continued as between the State and the contemplated Union of India; and it refers to the fact that the Constituent Assembly of India which had framed the Constitution of India included the duly appointed representatives of the State and that the said Constitution provided a suitable basis to continue the constitutional relationship between the State ad the contemplated Union of India. On January 26, 1950, the Constitution of India came into force.”

“(15) This proclamation was followed by the Constitution (application to Jammu and Kashmir) Order, 1950 (C. O. 10) which was issued on January 26, 1950, by the President in consultation with the Government of Jammu & Kashmir and in exercise of the Powers conferred by Cl. (1) of Art. 370 of the Constitution. It came into force at once. Clause 2 of this order provides that for the purposes of sub-cl. (i) of Art. 370 of the Constitution, the matters specified in the First Schedule to the Order correspond to matters specified in the Instrument of Accession governing the accession of the State of Jammu and Kashmir to the Dominion of India as the matter with regard to which the Dominion Legislature may make laws for that State; and accordingly the power of Parliament to make laws for that State shall be limited to the matters specified in the said first Schedule. Clause (3) provides that, in addition to the provisions of Art. 1 and Art. 370 of the Constitution the only other provisions of the Constitution which shall apply to the State of Jammu and Kashmir shall be those specified in the Second Schedule to the Order and shall so apply subject to the exceptions and modifications specified in the said Schedule. The First Schedule to the Order specified 96 items occurring in the Union List; while the Second Schedule set out the articles of the Constitution made applicable to the State together with the exceptions and modifications. Later on we will have occasion to refer to some of these articles on which the appellant has relied.”

32. Further, paragraphs 4 to 6 & 12 of the judgement of Hon’ble the Supreme Court in case titled Sampat Prakash versus State of J&K, reported in AIR 1970 SC 1118, are taken note of :

“4. Article 370 of the Constitution is as follows:-

“370. (1) notwithstanding anything in this Constitution,-

(a) The provisions of Art. 238 shall not apply in relation to the State of Jammu & Kashmir; (b) the power of Parliament to make laws for the said State shall be limited to- (i) those matters in the Union List and the 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 the State to the Dominion of India as the matters with respect to which the Dominion Legislature may make laws for that State; and (ii) such other matters in the said Lists as, with the concurrence of the Government of the State, the President may by order specify. Explanation. For the purposes of this article, the Government of the State means the person for the time being recognized by the President as the Maharaja of Jammu & Kashmir acting on the advice of the Council of Ministers for the time being in office under the Maharaja’s Proclamation dated the fifth day of March, 1948; (c) the provisions of article (1) and of this article shall apply in relation to that State; (d) of that clause be given before the Constituent shall apply in relation to that State subject to such exceptions and modifications as the President may be order specify: Provided that no such order which relates to the matters specified in the Instrument of Accession of the State referred to in paragraph (i) of sub-clause (b) shall be issued except in consultation with the Government of the State;

Provided further that no such order which relates to matters other than those referred to in the last preceding proviso shall be issued except with the concurrence of that Government.

(2) If the concurrence of the Government of the State referred to in paragraph (ii) of sub-clause (b) of clause (1 ) or in the second proviso to sub-clause (d) of that clause be given before the Constituent Assembly for the purpose of framing the Constitution of the State is convened, it shall be placed before such Assembly for such decision as it may take thereon.

(3) Notwithstanding anything in the foregoing provisions of this article, the President may, by public notification, declare that this article shall cease to be .operative or shall be operative only with such exceptions and modifications and from such date as he may specify:

Provided that the recommendation of the Constituent Assembly of the State referred to in clause (2) shall be necessary before the President issues such a notification.”

The first argument was that this article contained temporary provisions which ceased to be effective after the Constituent Assembly convened for the purpose of framing the Constitution the Jammu & Kashmir State had completed its task by framing the Constitution for that State. Reliance was placed on the historical background in which this Art.370 was included in the Constitution to urge that the powers under this article were intended to be conferred only for the limited period until the Constitution of the State was framed, and the President could not resort to them after the Constituent Assembly had completed its work framing the Constitution of the State. The back ground or the legislative history, which reference was made was brought to our notice by learned counsel by drawing our was brought to our notice by e attention to the speech of the Minister ,Sri N. Gopalaswami Ayyangar when he moved in the Constituent Assembly clause 306A of the Bill, which now corresponds ‘with Article 370 of the Constitution. It was stated by him that conditions in Kashmir were special and required special treatment. The special circumstances, to which reference was made by him were :–

(1) that there had been a war going on within the limits of Jammu & Kashmir State; (2) that there was a cease-fire agreed to at the beginning of the year and that cease-fire was still on; (3) that the conditions in the State were still unusual and abnormal and had not settled down; (4) that part of the State was still in the hands of rebels and enemies; (5) that our country was entangled with the United Nations in regard to Jammu & Kashmir and it was not possible to say when we would be free from this entanglement; (6) that the Government of India had committed themselves to the people of Kashmir in certain respects which commitments included an undertaking that an opportunity be given to the people of the State to decide for themselves whether they would remain with the Republic or wish to go out of it; and (7) that the will of the people expressed through the Instrument of a Constituent Assembly would determine the Constitution of the State as well as the sphere of Union Jurisdiction over the State. Learned counsel urged that, in this background, Art. 370 of the Constitution could only have been intended to remain effective until the Constitution of the State was framed and the will of the people of Jammu & Kashmir had been expressed and, thereafter, this article must be held to have become ineffective, so that the modifications made by the President in exercise of the powers under this article, subsequent to the enforcement of the Constitution of the State, would be without any authority of law. The Constitution of the State came into force on 26th January, 1956 and, therefore, the two Orders of 1959 and 1964 passed by the President in purported exercise of the power under Art 370 were void. It was also urged that the provisions of clause (2) of Art. 370 support this view, because it directs that, if the concurrence of the Government of the State is given under para (ii) of sub-clause (b) of clause (1) or under the second proviso to sub-clause (d) of that clause before the Constituent Assembly for ,the purpose of flaming the Constitution of the State is convened, that concurrence has to be placed before such Assembly for such decision as it may take thereon. From this, it was sought to be inferred that the power of the President, depending on the concurrence of the Government of the State, must be exercised before the dissolution of the Constituent Assembly of the State, so that the concurrence could be placed for its decision, and that. Power must be held to cease to exist after the dissolution of the Constituent Assembly when that course became impossible.”

“5. We are not impressed by either of these two arguments advanced by Mr. Ramamurthy. So far as the historical background is concerned, the Attorney-General appearing on behalf of the Government also relied on it to urge that the provisions of Art. 370 should be held to be continuing in force, because the situation that existed when this article was incorporated in the Constitution had not materially altered, and the purpose of introducing this article was to empower the President to exercise his discretion in applying the Indian Constitution while that situation remained unchanged. There is considerable force in this submission. The legislative history of this article cannot, in these circumstances, be of any assistance for holding that this article became ineffective after the Constituent Assembly of the State had framed the Constitution for the State.”

(emphasis supplied)

“6. The second submission based on clause (2) of Art. 370 does not find support even from the language of that clause which only refers to the concurrence given by the Government of the State before the Constituent Assembly was convened, and makes no mention at all of the completion of the work of .the Constituent Assembly or its dissolution.”

“12. The legislative history of this article will also fully support this view. It was because of the special situation existing in Jammu & Kashmir that the Constituent Assembly framing the Constitution decided that the Constitution should not become applicable to Jammu & Kashmir under Art. 394 under which it came into effect in the rest of India, and preferred to confer on the President the power to apply the various provisions of the Constitution with exceptions and modifications. It was envisaged that the President would have to take into account the situation existing in the State when applying a provision of the Constitution and such situations could arise from time to time. There was clearly the possibility that, when applying a particular provision, the situation might demand an exception or modification of the provision applied; but subsequent changes in the situation might justify the rescinding of those modifications or exceptions. This could only be brought about by conferring on the President the power of making orders from time to time under Art/ 370 and this power must, therefore, be held to have been conferred on him by applying the provisions of Section 21 of the General Clauses Act for the interpretation of the Constitution.”

(emphasis supplied)

33. The issue whether expression ‘banking’ in Entry 45 List – I, (Union List) of 7th Schedule of the Constitution of India, would include providing of mechanism by which the moneys, due to the banks/financial Institutions, can be recovered, has been settled by the apex Court in case titled Union of India and another – Appellants v. Delhi High Court Bar Association and others – respondents, reported in 2002 (4) SCC 275 and case titled Central Bank of India v. State of Kerala and Orsreported in [2009]4 SCC 94.

Paragraph 14 of the judgement titled Union of India and another – Appellants v. Delhi High Court Bar Association and others – respondents, reported in 2002 (4) SCC 275 is taken note of :

“14.The Delhi High Court and the Guwahati High Court have held that the source of the power of Parliament to enact a law relating to the establishment for the Debts Recovery Tribunal is Entry 11-A of List III which pertains to “administration of justice; constitution and organization of all courts, except the Supreme Court and the High Courts”. In our opinion, Entry 45 of List I would cover the types of legislation now enacted. Entry 45 of List I relates to “banking”. Banking operations would, inter alia, include accepting of loans and deposits, granting of loans and recovery of the debts due to the bank. There can be little doubt that under Entry 45 of List I, it is Parliament alone which can enact a law with regard to the conduct of business by the banks. Recovery of dues is an essential function of any banking institution. In exercise of its legislative power relating to banking, Parliament can provide the mechanism by which monies due to the banks and financial institutions can be recovered. The Tribunals have been set up in regard to the debts due to the banks. The special machinery of a tribunal which has been constituted as per the preamble of the Act, “for expeditious adjudication and recovery of debts due to banks and financial intuitions and for matters connected therewith or incidental thereto” would squarely fall within the ambit of Entry 45 of List I. As none of the items in the lists are to be read in a narrow or restricted sense, the terms “banking” in Entry 45 would mean legislation regarding all aspects of banking including ancillary or subsidiary matter relating to banking. Setting up of an adjudicatory body like the Banking Tribunal relating to transactions in which banks and financial intuitions are concerned would clearly fall under Entry 45 of List I giving Parliament specific power to legislate in relation thereto.”

(emphasis supplied)

(2009) 4 SCC page 94 para 36 is taken note of:-

“36. Undisputedly, the DRT Act and the Securitisation Act have been enacted by Parliament under Entry 45 in List I in the Seventh Schedule whereas the Bombay and Kerala Acts have been enacted by the State Legislature concerned under entry 54 in List II in the Seventh Schedule. To put it differently, two sets of legislations have been enacted with reference to entries in different lists in the Seventh Schedule. Therefore, Article 254 cannot be invoked per se for striking down State legislations on the ground that the same are in conflict with the Central legislations. That apart, as will be seen hereafter, there is no ostensible overlapping between two sets of legislations. Therefore, even if the observations contained in Kesoram Industries case are treated as law declared under Article 141 of the Constitution, the State legislations cannot be struck down on the ground that the same are in conflict with Central legislations.”

(emphasis supplied by us)

34. Hon’ble the Supreme Court, in case titled Central Bank of India – Appellant v. State of Kerala and others – respondents, reported in [2009] 4 SCC 94, at paragraph 36, has most specifically held that the Act of 2002 has been enacted by the Parliament under Entry 45 List – I, (Union List) of 7th Schedule of the Constitution of India.

35. Mr. P.N.Raina, learned Senior Advocate, while referring to case titled Rustum Cavasjee Cooper v. Union of India, reported in 1970(1) SCC 248, submitted that this judgement of the Hon’ble bench of eleven Judges has not been brought to the notice of the apex Court in Union of India and another – Appellants v. Delhi High Court Bar Association and others –respondents case reported in 2002(4) SCC 275 and (2009) 4 SCC 94. While referring to Cooper’s case supra, contention of learned counsel was that the expression ‘banking’ would not include providing of mechanism for recovery of moneys due to the banks from the borrowers. Learned counsel, as already stated, read the judgement at great length to canvass his point.

36. The issue involved in Cooper’s case was not whether the entry ‘banking’ would include setting up and providing of mechanism for recovery of moneys due to the banks from the borrowers. In the said case, the declaration was sought that the Banking Companies (Acquisition & Transfer of Undertakings) Ordinance 8 of 1969, promulgated on 19th July, 1969 and the Banking Companies (Acquisition & Transfer of Undertakings) Act , of 1969, impair the rights of the owners of Banks guaranteed under articles 14, 19 & 31 of the Constitution and on that count are invalid. The apex court, by its majority decision, declared that the aforesaid Act is valid, and the Act was held to be within the legislative competence of the Parliament. However, it was declared that the Act made hostile discrimination against the named banks, in that, it prohibited the named banks from carrying on banking business, whereas other banks – Indian & foreign, were permitted to carry on banking business and even new banks could be opened, which may engage in banking business. It was further held that the impugned Act, in reality, restricted the named banks, whose undertakings were taken over under the said Act from carrying on business other than banking, as defined in section 5(B) of the Banking Regulation Act 1949 and it was further declared that the Act violated the right for payment of compensation guaranteed under article 31.

37. The question, which is subject matter of these petitions, viz. the mechanism provided for recovery of the moneys due from the borrowers in terms of the Act of 2002 was not the issue involved in Cooper’s case. Whole hog reliance placed by Mr. P.N.Raina, on Cooper’s judgement, is of no consequence for determination of the issue involved in these writ petitions.

38. Entry 45 ‘banking’ of List – I, (Union List) of 7th Schedule of the Constitution of India as also the expression ‘banking’ as defined in Banking Regulation Act 1949, would not mean that a bank, in the course of its banking business, though has the power to advance loans but has no power to recover the same. No sensible Government, Corporation or a private Company or an individual will indulge in ‘banking’ if it is to be held that a banker, in the course of his banking, can only advance the money and cannot recover the same. The banking business cannot even take off if such a view is taken. Even otherwise, it does not stand to reason that in banking business, when money is advanced by a banker, it would not include his right to recover the same. Right to recover the money advanced and the money due to the banks/financial Institutions, is inherent in banking business.

39. Recovery of moneys due to the banks can be effected on the basis of agreement arrived at between the lender and borrower and recovery can be effected through remedies available in common law. In common law, the ordinary mode of seeking recovery of money by the banks is by institution of Suits in the Courts established by the State. The mechanism can also be prescribed for recovery of moneys due to the banks by enacting laws. The validity of the Act of 1993, which is not applicable to the State of J&K, has been upheld by Hon’ble the Supreme Court in Union of India versus Delhi High Court Bar Association’s case. Similarly the apex Court has upheld the validity of the Act of 2002 in Mridula’s case reported in AIR 2004 SC 2371 – (2004) 4 SCC 311. In the said case, challenge was thrown to the Act of 2002 on the ground that same is arbitrary and violative of article 14 of the Constitution of India.

40. In view of observations of the apex Court in Central Bank of India – Appellant versus State of Kerala and others – respondents and Union of India versus Delhi High Court Bar Association cases, these writ petitions would require to be dismissed, but regard being had to the special constitutional and legal position occupied by the State of J&K in the community of States of Union of India and in view of the constitutional and legal issues raised by learned counsel about the same, the applicability of some of the provisions of the Act of 2002, more particularly, section 13(1) and (4) thereof, has come under cloud. The issues raised at bar would require to be considered from this stand point now.

41. Hon’ble the Supreme court in Prem Nath Koul’s case, from paragraph 6 onwards, has dealt, in some detail, with the events and constitutional changes, which took place in Kashmir from 1925 onwards, which are briefly summarized as under :

(A) In 1925, Maharaja Hari Singh succeeded Maharaja Pratap Singh as ruler of Kashmir ;

(Ai) In the year 1934, in pursuance to peoples’ demand for establishment of responsible Government, Maharaja Hari Singh issued Regulation No.1 of 1991(1934). Aii) The preamble of the Regulation expressed the intention of Maharaja to provide for association of his subjects in the matter of legislation and administration of the State and in pursuance to the said intention, the Regulation were promulgated.

(Aiii) The Regulation consisted of 46 sections which dealt with legislative, executive and Judicial powers of Maharaja himself. It also referred to the subjects which were reserved from the operation of Regulation.

(Aiv) Maharaja made provision for constitution of legislature of the State.

(Av) Conferred authority on council to make rules for specific purposes and referred to other relevant and material topics.

(Avi) Section 3 provided that all powers viz. legislative,

Executive and judicial in relation to the State and its Government, are declared to be and to have been always, inherent in and possessed of and retained by– the Maharaja of J&K and nothing contained in the Regulation shall affect or be deemed to have affected his right and prerogative to make and pass Regulations, Proclamations and Ordinances by virtue of his inherent powers.

Avii) Section 30 laid down that no measure shall be deemed to have been passed by the Praja Sabha until and unless the Maharaja signified his assent thereto.

(Aviii) The Regulation left it to the absolute discretion of Maharaja whether to assent to such a measure or not .

(para 6 of Prem Nath Koul’s judgement).

(B) Five years later, Maharaja promulgated the J&K Constitution Act 14 of 1996 (1939).

(Bi) The preamble of the Constitution referred to a Proclamation issued on 11th June, 1939, in which the Maharaja’s decision was expressed to further take steps to enable his subjects to make orderly progress in the direction of attaining the role of active cooperation between the executive and legislature of the State in ensuring maximum happiness of the people.

(Bii) In accordance with the aforesaid desire, the text of the Constitution, contained in Regulation (I) of 1991 was thoroughly overhauled and effort was made to bring the amended Constitution in tune with the similar Constitutions of its type.

(Biii) The Constitution is divided into 06 parts and includes 78 sections.

(Biv) Section 5 of the Act, like section 3 of the earlier Regulation, recognized and preserved all inherent powers of Maharaja, whereas section 4 provided that the State was to be governed by and in the name of His Highness, and all rights, authority and Jurisdiction which appertain to the Government of the State, are exercisable by His Highness, in so far as, may be otherwise provided by or under the Act or as may be otherwise directed by His Highness.

(Bv) The other provisions of the Act were all subject to over riding powers of His Highness specifically preserved by section 5.

(Bvi ) The constitutional powers of the Maharaja under the Act of 1939 were, in substance, exactly same as those under the earlier Act. (para 7 of Prem Nath Koul’s judgement).

(C ) The Indian Independence Act 1947 (for short Act of 1947) was enacted and during this time, the State of J&K was being governed by Maharaja, and the second Constitution, as amended from time to time, was in operation.

(Ci ) Under section 7(1)(b) of the Act of 1947, the suzerainty of His Majesty over the Indian States lapsed and with it lapsed all the treaties and agreements in force at the date of passing of the Act of 1947 between His Majesty and the rulers of the Indian States.

(Cii ) All obligations of His Majesty existing at that time towards Indian States or the rulers thereof, and all powers, rights authority or jurisdiction exercisable by His Majesty at that date in or in relation to Indian States by treaty, agreement, usage, sufferance or otherwise also lapsed.

(Ciii) The proviso to said section, however, prescribed that notwithstanding anything in para (b),effect shall, as nearly as may be, continue to be given to provisions in such agreements as therein referred to in relation to the subjects enumerated in the proviso or other like matters until the provisions in question are denounced by the ruler of Indian State on the one hand, or are superseded by his subsequent agreements on the other hand.

(Civ) With the lapse of British paramountcy , the State of J&K was free from limitations imposed by the said paramountcy subject to provisions of the proviso aforesaid.

(para 8 of Prem Nath Koul’s judgement).

(D ) The tribal leaders invaded the State on 22nd October, 1947. The Maharaja on 29th October, 1947 signed Instrument of Accession with India, which had then become an independent dominion.

(Di ) By the first clause of the Instrument of Accession, the Maharaja declared that he had acceded to the dominion of India with the intent that Governor General of India, the dominion, legislature, the federal Court and any other dominion authority established for the purpose of dominion shall, by virtue of Instrument of Accession, subject always to the terms thereof and for the purpose only of the dominion,exercise, in relation to the State of J&K, such functions as may be vested in them by or under the Government of India Act1935 as in force in the dominion of India on 15th August, 1947.

(para 9 & 10 of Prem Nath Koul’s judgement).

(E) By clause (3) of the Instrument of Accession, the Maharaja agreed with the maters specified in the schedule attached to the Instrument of Accession, where the matters with respect to which the dominion legislature may make laws for the State.

(Ei ) Clause (5) provided that the Instrument of Accession shall not be varied by any amendment to Government of India Act, 1935or of the Indian Independence Act, 1947, unless such amendment was accepted by Maharaja by an Instrument supplementary to the original Instrument of Accession.

(Eii) By clause (7), it was agreed that Maharaja shall not be deemed to be committed to the acceptance to any future Constitution of India nor would his discretion be fettered to enter into agreements with Government of India under any such future Constitution.

(Eiii ) Clause (8) provided that nothing in the Instrument affects the continuance of the

Maharaja’s sovereignty under and over his State, save as provided by or under the Instrument, the exercise of any powers, authority and rights then enjoyed by him as ruler of the State, or the validity of any law then in force in the State.

(Eiv ) The Schedule attached to the Instrument referred to four topics, Defence, External Affairs, Communication and ancillary and under these topics, 20 matters were serially enumerated as those in respect of which the dominion legislature had power to make laws in the State. Thus, by the Instrument of Accession, the Maharaja took the very important step of recognizing the fact that his State was part of the dominion of India.

(para11 of Prem Nath Koul’s judgement).

(F) On 05th March, 1948, Maharaja replaced the emergency administration by interim Government and provided for its powers, duties and functions pending the formation of a fully democratic Constitution.

(Fi ) Clause (4) of the Proclamation provided that the council of Ministers shall take appropriate steps, as soon as restoration of normal conditions are completed to convene a National Assembly based on adult franchise.

(Fii) Clause (5) laid down that the Constitution to be framed by the National Assembly shall provide adequate safeguards for the minorities and contain appropriate provisions guaranteeing freedom of conscience, freedom of speech and freedom of assembly.

(Fiii ) Clause (6) provided that after completion of framing of the Constitution by the National Assembly, the same should be submitted through Council of Ministers to Maharaja for his acceptance.

(para 12 of Prem Nath Koul’s case)

(G) On 26th June, 1943, Maharaja issued a Proclamation by which he entrusted to Yuvraj Karan Singh Bahadur all his powers and functions in regard to Government of the State.

(Gi ) On 25th November, 1949, the Yuvraj Karan Singh issued a proclamation by which he declared and directed that the Constitution of India, shortly to be adopted by the Constituent Assembly of India, shall, in so far as, it is applicable to the State of J&K, govern the constitutional relationship between the State and contemplated Union of India and shall be enforced for the State by him, his heirs and successors in accordance with the terms of its provisions.

(Gii) He also declared that the provisions of the said Constitution, shall, as from the date of its commencement, substitute and abrogate all other constitutional provisions inconsistent therewith which were then in force in the State.

(para 14 of Prem Nath Koul’s case)

(H) The Proclamation aforestated was followed by the Constitution (application to J&K) order, 1950 (C-o-10), which was issued on January 26, 1950 by the President in consultation with J&K and for exercise of powers conferred by clause (1) of article 370 of the Constitution of India.

(para 15 of Prem Nath Koul’s case)

(I) The Yuvraj Karan Singh, on 20th April, 1951 issued a Proclamation whereunder he directed that the Constituent Assembly, comprising all representations of the people elected on the basis of adult franchise, shall be constituted forthwith for purposes of framing a Constitution for the State of J&K. The Proclamation set out the manner in which the members of the Constituent Assembly would be elected and also made provisions for holding of said elections.

(Ii ) The Yuvraj Karan Singh also felt that the Proclamation issued by the Maharaja on 05th March, 1948, with regard to convening the National Assembly, no longer met the requirements of the situation of the State.

Iii) By the Constitution, thus framed, the hereditary rule of the State was abolished and a provision was made for election of Sadar-i-Riasat to be the head of the State.

(Iiii) On 15th November, 1952, the Constitution (application to J&K) IInd amendment order 1952 (C-0-43) was issued which came into force on 17th November, 1952.

(paras 20 & 21 of Prem Nath Koul’s case)

(J) Hon’ble the Supreme Court rejected the argument that the execution of Instrument of Accession affected, in any manner, the legislative, Executive and judicial powers in regard to the Government of Sate which then vested in the ruler of the State.

(Ji) At paragraph 27 of Prem Nath Koul’s case, Hon’ble the Supreme Court has made it clear that until the Maharaja issued his proclamation on 29th June, 1949, all his powers, legislative, executive and judicial as well as his right and prerogative vested in him as before.

(Jii) At paragraph 30 of Prem Nath Koul’s case, it has been made clear by Hon’ble the Supreme Court that proclamation of 26th November, 1949, did not affect Yuvraj Karan Singh’s authority and power as ruler of the State which had been conferred on him by proclamation of his father issued in that behalf. “

42. Reference to Prem Nath Koul’s and Sampat Prakash’s decision has been made to show 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.

43. The laws made by Maharaja to define the State subjects and the laws made by him in respect of prohibition on alienation of immoveable property in favour of non State subjects have been protected by the constitutional laws viz. Section 76 of Act of 1939 AD and other statutory laws including that of section 140 of the Transfer of Property Act, 1882. The State of J&K is not only unique in view of having its own Constitution but has other special features, one of which has been referred to hereinabove.

44. 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.

45. Section 13(4) of the Act of 2002, authorizes the secured creditor, which, in the cases on hand, are the banks, who being juristic persons, are not State Subjects, to take possession of secured assets, which would include immoveable properties of the borrowers and have been further armed with the power to transfer by way of lease, assignment or sale for realizing the money due to them.

46. 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. The State legislature, in terms of section 140 of Transfer of Property Act, 1882, has authorized for mortgage of property in favour of the Institutions mentioned therein. In respect of schedule first, only simple mortgage has been authorized to be executed in their favour. The sale of immoveable property in pursuance to a Civil Court Decree obtained by the bank/financial Institution in respect of the mortgaged property cannot be made in favour of the non State subjects. Since the field of legislation as prescribed in List I, Entries of some of which have been extended to the State of J&K, do not authorize the Union Parliament to legislate law, as already stated, which affects the interests of the State subjects/citizens of J&K qua their immoveable property, the competence of the Parliament to legislate section 13 (1) and (4) is held to be beyond its legislative competence to the extent of State of J&K. Similarly sub section (1) of section 13 of the Act of 2002, which prescribes that “notwithstanding anything contained in section 69 & 69-A of Transfer of Property Act”, would not be applicable to the State of J&K, inter alia, the Union Parliament has no legislative competence to enact law relating to transfer of property in the State of J&K and secondly reference is made to provisions of Transfer of Property Act, which are applicable to the entire country excepting the State of J&K, which has its own law called Transfer of Property Act, 1882. Furthermore, section 13 cannot be made applicable in its entirety in view of its non obstinate clause to the State of J&K. Similarly section 17(A) of the Act of 2002, is beyond the legislative competence of the Union Parliament as even extending the jurisdiction of the existing Court in the State of J&K is covered by Entry ‘administration of justice’ and Union Parliament lacks legislative power to enact such provision in respect of State of Jammu and Kashmir. 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.

47. In Prem Nath Koul’s case, it has been authoritatively ruled by Hon’ble the Supreme Court 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.

48. 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.

49. Entry 45 of List (I) of Schedule 7th of Constitution of India has been extended to the State of J&K in accordance with the mechanism and procedure prescribed by article 370. The Parliament has, thus, power to legislate laws in respect of banking. The Parliament, however, has no power to legislate law about the subject “administration of justice, the land & the other immoveable properties”. In terms of section 5 of the Constitution of J&K, the State Legislature has power to enact laws, besides others, on the aforesaid subjects as well. In view of law laid down by Hon’ble the Supreme Court in cases reported in AIR 1951 SC 69 and AIR 1995 SC 21, the Entry “administration of justice” would include creation of Courts conferring jurisdiction on them as also enlarging and diminishing of jurisdiction of the Courts. The Parliament could not, of its own, thus, make law like section 17(A) and 18(B) of the Act of 2002 as same has conferred jurisdiction on the Courts in the State of J&K, which is, exclusively, the power of State Legislature, in as much as the Entry 11-A of List (III) (Concurrent List) has not been extended to the State of J&K. Similarly, the law regarding transfer of immoveable property, the Limitation Act and provision of the Act of 2002, which has the effect to supersede State laws, does not fall within the competence of the Parliament to the extent of State of Jammu and Kashmir. The provisions of the Act of 2002, more particularly, those, reference whereof has been made in this judgement, could not be legislated by the Parliament in respect of State of Jammu and Kashmir.

50. The laws made by the Maharaja are protected by the Constitution of 1939 AD and the subsequent Constitution framed by the Constituent Assembly of the State of J&K, which includes protection given to the State subjects and non transferring of immoveable properties to non State subjects. The Act of 2002, which, in view of discussion made in this judgement, affects these laws and rights of the State subjects, thus cannot be extended to the State of J&K.

51. The Constitution of J&K, as already stated, is sovereign in character and the State Assembly, exercises sovereign power to legislate laws.

52. In the community of States of India, in view of law laid down by Hon’ble the Supreme Court in Prem Nath Koul and Sampat Prakash’s cases, 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. Article 35(A), as has been applied to the State of J&K, not only recognizes but clarifies the aforestated constitutional and legal position. This article, on its own, does not give anything new to the State of J&K.

53. Article 14 of the Constitution of India, as has been made applicable to the State of J&K, thus, gave equal protection of laws to the State subjects/citizens as a class apart. Similarly, article 19(1)(f) of the Constitution of India, which has been made applicable to the State of J&K and till date continues to be in force in the State, recognizes the right to own, hold and dispose of property, which right otherwise is inherent in the State subjects/citizens of the State of J&K, who stand defined in terms of Elans/Orders of His Highness and the Constitution of J&K.

54. Similarly the expression “life” appearing in article 21, has wide connotation. Human life has many essential components and attributes. The basic instinct is survival of human beings. Human life is created with a definite purpose. It comprises of many characteristics, viz. spiritual, physical and material. The physical existence and material support is necessary for attaining spiritual excellence. Human being acquires properties both moveable and immoveable. These material things comprise an essential component of human being/life. A person can be deprived of his physical and material components by procedure established by law. Laws have their own universe. They operate in matter and not in vacuum. The laws are located in time and space. In the State of J&K, the immoveable property of a State subject/citizen, cannot be permitted to be transferred to a non State subject. This legal and constitutional protection is inherent in the State subjects of the State of J&K and this fundamental and basic inherent right cannot be taken away in view of peculiar and special constitutional position occupied by State of Jammu and Kashmir. No law can be made to abridge or affect this basic right of citizens of Jammu and Kashmir. The Act of 2002 does adversely impact the inherent, natural and constitutional rights of the State subjects. Even otherwise, as already stated, the Parliament lacks the power to enact such a law in view of express constitutional provisions in respect of Jammu and Kashmir.

55. Article 35(A) of the Constitution of India, which has been applied to the State of J&K, as already stated, clarifies the already existing constitutional and legal position and does not extend something new to state of J&K. Article 35-A is clarificatory provision to clear the issue of constitutional position obtaining in rest of country in contrast to State of 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 state of Jammu and Kashmir. The citizens of State of Jammu and Kashmir, as already stated, have their own constitution, and their sovereign character which cannot be challenged, altered or abridged. The power of Parliament to make laws in respect of State of Jammu and Kashmir is circumscribed and it can make laws for it only where permitted by State and not otherside, and that too in accordance with mechanism prescribed by Article 370 of Constitution of India.

56. Article 152 and article 368 of the Constitution of India, while referring to State, provides that it does not include the State of J&K.

57. Amendment to Rules of 2002, which provide that a non State subject cannot purchase the immoveable property in consequence to sale made in terms of section 13(4) of the Act of 2002 is rendered inconsequential and otiose in view of reasons recorded in this judgement. Section 13(4) empowers the non State subject to take possession of immoveable property which is not countenanced by State Constitution and State Laws. Furthermore, in view of the aforestated discussion, whereunder it has been held that section 17 (A) and 18(B) have been enacted without legislative competence, there being no redressal forum available against the action taken u/s 13 of the Act of 2002, it would not be applicable to the State of J&K. Section 34 takes away the jurisdiction of the civil Courts and section 35 has over riding effect on all other laws which include Transfer of Property Act of the State of J&K, more particularly, Section 140 thereof. Citizens of Jammu and Kashmir in view of their own constitution constitute a separate and distinct class in themselves. In view of the discussion made in this judgment parliament lack power to enact law of the above nature in respect of State of J&K. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 modifies the State transfer of property Act, State Civil Procedure Code, Civil Courts Act, State Limitation Act and above all the adversely impacts the inalienable property rights of State Subjects. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is made beyond legislative competence by Parliament to the extent of State of Jammu and Kashmir, thus cannot be extended to this State. Any law made by Parliament which affects the laws made by State legislature cannot be extended and applied to State of J&K. It also affects the rights of State subject/citizens recognized by the Constitution of India and Constitution of State of J&K. In view of aforesaid discussion, the other issues raised and referred to at para 19 need not to be dealt with.

58. For the above stated reasons, these writ petitions are disposed of in the following manner :

“It is held that the Union Parliament does not have legislative competence to make laws contained in section 13, section 17(A), section 18(B) section 34, 35 and section 36, so far as they relate to the State of J&K ;

It is further held that in view of the aforesaid declaration, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 cannot be enforced in the State of J&K ;

It is further held that the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest 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.

In consequence to the above said declaration, the notices issued by the respondent – banks in terms of section 13 or any other coercive method taken under section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, are quashed, and set aside. The respondents Banks/Institutions are restrained from proceeding further in terms of action initiated on the basis of provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 against the State Subjects/citizens of State of Jammu and Kashmir.

The respondent – banks are at liberty to recover the money due to them from the borrowers by having recourse to the appropriate laws and by approaching the appropriate forums.

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.

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.

Registry to place copy of this judgment on lead petitions of Srinagar and Jammu wings respectively and operative part of judgments be placed on all other petitions, details whereof are given in the cause lists annexed with this judgment. The record of writ petition be send to respective wings of the Court.

Full Text of Supreme Court Judgement on SARFAESI Act

Greater Kashmir

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 12237-12238_OF 2016 [ARISING OUT OF SLP (CIVIL) NOS. 30884-30885 OF 2015] STATE BANK OF INDIA ... APPELLANT VERSUS SANTOSH GUPTA AND ANR. ETC. ...RESPONDENTS WITH CIVIL APPEAL NOS. 12240-12246_OF 2016 [ARISING OUT OF SLP (CIVIL) NOS.30810-30815 & 30817 OF 2015] [SLP (CIVIL) NOS.30810-30817 OF 2015] STATE BANK OF INDIA AND ORS. ...APPELLANTS VERSUS ZAFFAR ULLAH NEHRU AND ANR.

ETC. ...RESPONDENTS JUDGMENT R.F. Nariman, J. Leave granted. 1. The Constitution of India is a mosaic drawn from the experience of nations worldwide. The federal structure of this Constitution is largely reflected in Part XI which is largely drawn from the Government of India Act, 1935. The State of Jammu & Kashmir is a part of this federal structure. Due to historical reasons, it is a State which is accorded special treatment within the framework of the Constitution of India. This case is all about the State of Jammu & Kashmir vis*-a-vis* the Union of India, in so far as legislative relations between the two are concerned. 2. The present appeals arise out of a judgment dated 16.7.2015 passed by the High Court of Jammu & Kashmir at Jammu, in which it has been held that various key provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "SARFAESI") were outside the legislative competence of Parliament, as they would collide with Section 140 of the Transfer of Property Act of Jammu & Kashmir, 1920. The said Act has been held to be inapplicable to banks such as the State Bank of India which are all India banks. 3. Before going into the merits of the case, it is important to note that SARFAESI is an enactment which inter alia entitles banks to enforce their security interest outside the court's process by moving under Section 13 thereof to take possession of secured assets of the borrower and sell them outside the court process. Sections 13 (1) and (4) and 17 are key provisions of SARFAESI relevant for the present case and are set out herein as follows: "Section 13. Enforcement of security interest. (1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of court or tribunal, by such creditor in accordance with the provisions of this Act. (4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset; (b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset: PROVIDED that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt: PROVIDED FURTHER that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt, (c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor; (d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt. xxx Section 17. Right to appeal. (1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application along with such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken: PROVIDED that different fees may be prescribed for making the application by the borrower and the person other than the borrower. Explanation: For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section. (2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder. (3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the business to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to anyone or more measures referred to in sub-section (4) of section 13 taken by the secured creditors as invalid and restore the possession of the secured assets to the borrower or restore the management of the business to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4)of section 13. (4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of section 13 to recover his secured debt. (5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application: PROVIDED that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1). (6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any party to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal. (7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the rules made thereunder." 4. Section 34 declares that a Civil Court shall not have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal under the Act is empowered to determine, and Section 35 is a general non-obstante clause declaring that this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force. 5. The bone of contention in the present appeals is whether SARFAESI in its application to the State of Jammu & Kashmir would be held to be within the legislative competence of Parliament. To decide this question, we have heard wide ranging arguments from the learned Attorney General Shri Mukul Rohtagi and Shri Rakesh Dwivedi, learned Senior Advocate, on behalf of the Appellants. They have referred in detail to the provisions of Article 370 of the Constitution of India, read with Section 5 of the Jammu & Kashmir Constitution, 1956. It is their submission that the Instrument of Accession of Jammu and Kashmir, 1947 itself makes it clear that List I of the 7th Schedule of the Government of India Act, 1935 would apply, and that the various Constitution Application to J & K Orders issued from time to time under Article 370 makes it clear that Article 246 (1) read with Entry 45 and 95 List I would clothe Parliament with power to enact SARFAESI. In fact, according to them, even the impugned judgment of the High Court concedes this. According to them, once Entry 45 List I has no other competing Entry, inasmuch as List II of the 7th Schedule to the Constitution of India has not been extended to the State of Jammu & Kashmir, and Entry 11A dealing with Administration of Justice contained in List III of the 7th Schedule to the Constitution of India does not apply to Jammu & Kashmir, and Entry 6 List III dealing with transfer of property also does not apply, it is their case that Entry 45 List I is to be read in its full plenitude and is not cut down by the provisions of any other Entry. If it is found that the entire SARFAESI is in fact enacted under Entry 45 read with 95 of List I, it would be clear that no other enquiry is necessary, as the Act in pith and substance would be referable to these two entries. This being the case, the State's legislative power comes in only if none of the entries of List I or III are attracted. To refer to Entry 11A and to Entry 6, and further to state that Section 140 of the Transfer of Property Act of Jammu & Kashmir would render the key provisions of SARFAESI without legislative competence, is wholly incorrect. They referred to a number of judgments to show that recovery of loans is as much part of the business of banking as the giving of loans, and that therefore the entire 2002 Act would fall within Entry 45 read with Entry 95 List I. According to them, therefore, the impugned judgment is wrong on several fundamentals and needs to be set aside. They referred to and relied upon a number of other judgments which we will deal with in the course of this judgment. 6. Shri Vijay Hansaria, learned senior advocate, appearing on behalf of the private respondent, has argued that since both the Constitution of India and the Constitution of Jammu & Kashmir are expressions of the sovereign will of the people, they have equal status and none is subordinate to the other. His basic argument to meet the contentions of the appellants is that the SARFAESI Act, in pith and substance, relates to "transfer of property" and not "banking" and would, therefore, be outside the competence of Parliament and exclusively within the competence of the State Legislature. He further argued that the power of Parliament is expressly "limited" under Article 370(1 )(b) of the Constitution of India whereas under the Constitution of Jammu & Kashmir, the State Legislature has plenary powers over all matters, except those where the Parliament has power to make laws. He also argued that the subjects mentioned in the State List of the 7th Schedule under the Constitution of India were frozen and can never be delegated or conferred on Parliament so long as Article 370 remains and therefore any transference of a State List subject to the Concurrent List later cannot apply to the State of Jammu & Kashmir. He also argued that it is not enough under Article 370 to confer power on Parliament by a Presidential Order, but that every time Parliament enacts a law under such power, before such law can operate in the State of Jammu & Kashmir, the State Government's concurrence must be obtained. This was stated to be also for the reason that an amendment made to the Constitution of India will not apply unless the State concurs in applying it to the State of Jammu & Kashmir, in which case only a Presidential Order applying such amendment would take effect. Further, according to him, Section 140 of the Jammu & Kashmir Transfer of Property Act is in direct conflict with Section 13 of SARFAESI Act and the Transfer of Property Act must prevail. He further argued that Section 17A and 18B of the SARFAESI Act, being Sections relatable to administration of justice, which is purely a State subject, would also be ultra vires Parliament. He relied upon Article 35A and supported the impugned judgment on this score, and further stated that the various judgments cited on behalf of the appellants were distinguishable as the fact situation in the present case was completely different from the situation in those judgments. 7. Shri Sunil Fernandes, learned Standing Counsel for the State of Jammu & Kashmir, referred to Article 370 and the Constitution of Jammu & Kashmir in some detail and cited judgments of this Court dealing with the same. He also pointed out local statutory laws which prohibit transfer of land belonging to State residents to non State residents. His submission was that though the SARFAESI Act was enacted by Parliament by virtue of Entry 45 List I, yet Section 13(4) alone incidentally encroaches upon the property rights of permanent residents of the State of Jammu & Kashmir and must be read down so that it will not be permissible under this Section to sell property belonging to a permanent resident of the State to a person who is not a permanent resident of the State. It was his further submission that the proviso added to Rule 8(5) of the SARFAESI Rules must be read along with Section 13(4) of the SARFAESI Act and if so read, the State of Jammu & Kashmir would have no objection to the SARFAESI Act applying to the State of Jammu & Kashmir. 8. As Article 1 of the Constitution of India states, India is a Union of States. In an illuminating judgment, namely, State of West Bengal v. Union of India, 1964 (1) SCR 371, Chief Justice Sinha, in the majority judgment, has held that India is quasi-federal with a strong tilt to the Centre. In so holding, the learned Judge referred to four indicia of a real federation, as follows:- "(a) A truly federal form of Government envisages a compact or agreement between independent and sovereign units to surrender partially their authority in their common interest and vesting it in a Union and retaining the residue of the authority in the constituent units. Ordinarily each constituent unit has its separate Constitution by which it is governed in all matters except those surrendered to the Union, and the Constitution of the Union primarily operates upon the administration of the units. Our Constitution was not the result of any such compact or agreement: Units constituting a unitary State which were non-sovereign were transformed by abdication of power into a Union. (b) Supremacy of the Constitution which cannot be altered except by the component units. Our Constitution is undoubtedly supreme but it is liable to be altered by the Union Parliament alone and the units have no power to alter it. (c) Distribution of powers between the Union and the regional units each in its sphere coordinate and independent of the other. The basis of such distribution of power is that in matters of national importance in which a uniform policy is desirable in the interest of the units, authority is entrusted to the Union, and matters of local concern remain with the State. (d) Supreme authority of the Courts to interpret the Constitution and to invalidate action violative of the Constitution. A federal Constitution, by its very nature, consists of checks and balances and must contain provisions for resolving conflicts between the executive and legislative authority of the Union and the regional units." [at pages 396 - 397] 9. It was found that so far as States other than the State of Jammu & Kashmir are concerned, indicia (a) and (b) were absent whereas indicia (c) and (d) were present, and this coupled with a reading of various other Articles of the Constitution led a Constitution Bench of this Court to decide that the federal structure of the Constitution tilts strongly towards the Central Legislature and Central Government. 10. Insofar as the State of Jammu & Kashmir is concerned, it is clear that indicia (b) is absent. Insofar as the other indicia are concerned, the State does have its own separate Constitution by which it is governed in all matters, except those surrendered to the Union of India. Amendments that are made in the Constitution of India are made to apply to the State of Jammu & Kashmir only if the President, with the concurrence of the State Government, applies such amendments to the State of Jammu & Kashmir. The distribution of powers between the Union and the State of Jammu & Kashmir reflects that matters of national importance, in which a uniform policy is desirable, is retained with the Union of India, and matters of local concern remain with the State of Jammu & Kashmir. And, even though the Jammu & Kashmir Constitution sets up the District Courts and the High Court in the State, yet, the supreme authority of courts to interpret the Constitution of India and to invalidate action violative of the Constitution is found to be fully present. Appeals from the High Court of Jammu & Kashmir lie to the Supreme Court of India, and shorn of a few minor modifications, Articles 124 to 147 all apply to the State of Jammu & Kashmir, with Articles 135 and 139 being omitted. The effect of omitting Articles 135 and 139 has a very small impact, in that Article 135 only deals with jurisdiction and powers of the Federal Court to be exercised by the Supreme Court, and Article 139 deals with Parliament's power to confer on the Supreme Court the power to issue directions, orders, and writs for purposes other than those mentioned in Article 32 (2). We may also add that permanent residents of the State of Jammu & Kashmir are citizens of India, and that there is no dual citizenship as is contemplated by some other federal Constitutions in other parts of the world. All this leads us to conclude that even qua the State of Jammu & Kashmir, the quasi federal structure of the Constitution of India continues, but with the aforesaid differences. It is therefore difficult to accept the argument of Shri Hansaria that the Constitution of India and that of Jammu & Kashmir have equal status. Article 1 of the Constitution of India and Section 3 of the Jammu & Kashmir Constitution make it clear that India shall be a Union of States, and that the State of Jammu & Kashmir is and shall be an integral part of the Union of India. 11. It is interesting to note that the State of Jammu & Kashmir, though a state within the meaning of Article 1 of the Constitution of India, has been accorded a special status from the very beginning because of certain events that took place at the time that the erstwhile Ruler of Jammu & Kashmir acceded to the Indian Union. These events have been set out in detail in Prem Nath Kaul v. State of Jammu & Kashmir, (1959) Supp. 2 SCR 270, to which we will refer in some detail. The State of Jammu & Kashmir is dealt with by a special provision, namely, Article 370. At this juncture, it is necessary to set out this Article which reads as follows:- Article 370. Temporary provisions with respect to the State of Jammu and Kashmir. (1) Notwithstanding anything in this Constitution, (a) the provisions of Article 238 shall not apply in relation to the State of Jammu and Kashmir; (b) the power of Parliament to make laws for the said State shall be limited to (i) those matters in the Union List and the 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 the State to the Dominion of India as the matters with respect to which the Dominion Legislature may make laws for that State; and (ii) such other matters in the said Lists as, with the concurrence of the Government of the State, the President may by order specify. Explanation - For the purposes of this article, the Government of the State means the person for the time being recognised by the President as the Maharaja of Jammu and Kashmir acting on the advice of the Council of Ministers for the time being in office under the Maharaja's Proclamation dated the fifth day of March, 1948 ; (c) the provisions of Article 1 and of this article shall apply in relation to that State; (d) such of the other provisions of this Constitution shall apply in relation to that State subject to such exceptions and modifications as the President may by order specify: Provided that no such order which relates to the matters specified in the Instrument of Accession of the State referred to in paragraph (i) of sub clause (b) shall be issued except in consultation with the Government of the State: Provided further that no such order which relates to matters other than those referred to in the last preceding proviso shall be issued except with the concurrence of that Government. (2) If the concurrence of the Government of the State referred to in paragraph (ii) of sub clause (b) of clause (1) or in the second proviso to sub clause (d) of that clause be given before the Constituent Assembly for the purpose of framing the Constitution of the State is convened, it shall be placed before such Assembly for such decision as it may take thereon. (3) Notwithstanding anything in the foregoing provisions of this article, the President may, by public notification, declare that this article shall cease to be operative or shall be operative only with such exceptions and modifications and from such date as he may specify: Provided that the recommendation of the Constituent Assembly of the State referred to in clause (2) shall be necessary before the President issues such a notification. 12. The first thing that is noticed in Article 370 is that the marginal note states that it is a temporary provision with respect to the State of Jammu & Kashmir. However, unlike Article 369, which is also a temporary provision limited in point of time to five years from the commencement of this Constitution, no such limit is to be found in Article 370. Despite the fact that it is, therefore, stated to be temporary in nature, sub-clause (3) of Article 370 makes it clear that this Article shall cease to be operative only from such date as the President may by public notification declare. And this cannot be done under the proviso to Article 370 (3) unless there is a recommendation of the Constituent Assembly of the State so to do. This takes us to an interesting judgment of this Court, namely, Sampat Prakash v. the State of Jammu & Kashmir, (1969) 2 SCR 365. In this case, a writ petition under Article 32 was filed challenging the detention of the petitioner, in which it was contended that Article 370 contained only temporary provisions which cease to be effective after the Constituent Assembly of the State had completed its work by framing a Constitution for the State. The detention of the petitioner was continued without making a reference to the Advisory Board inasmuch as Article 35(c) of the Constitution had given protection to any law relating to preventive detention in Jammu & Kashmir against invalidity on the ground of infringement of any of the fundamental rights guaranteed by Part III of the Constitution initially for a period of five years, which was then extended to ten years and fifteen years. These extensions were the subject matter of challenge, and it was sought to be contended that the power of the President, depending on the concurrence of the Government of the State of Jammu & Kashmir, must be exercised under Article 370 before dissolution of the Constituent Assembly of the State, and that such power must be held to cease to exist after dissolution of the Constituent Assembly. This argument was repelled by the Constitution Bench by giving three reasons. First and foremost, it was stated that the reason for the Article was that it was necessary to empower the President of India to exercise his discretion from time to time in applying the Indian Constitution. This being so, Article 370 would necessarily have to be invoked every time the President, with the State's concurrence, feels it necessary that amendments to the Constitution of India be made applicable to Jammu & Kashmir, given the special proviso to Article 368 which applies only to the State of Jammu & Kashmir. Further, it was also held that the Article will cease to operate under sub-clause (3) only when a recommendation is made by the Constituent Assembly of the State to that effect. It was found that in fact the Constituent Assembly of the State had made a recommendation that the Article should be operative with one modification to be incorporated in the explanation to clause (1) of the Article, namely, that the Maharaja of Jammu & Kashmir be substituted by the expression "Sadar-I Riyasat of Jammu & Kashmir". Also, it is important to note that Article 370 (2) does not in any manner state that the said Article shall cease on the completion of the work of the Constituent Assembly or its dissolution. Having regard to all these factors, this Court clearly held that though the marginal note refers to Article 370 as only a temporary provision, it is in fact in current usage and will continue to be in force until the specified event in sub-clause (3) of the said Article takes place. It was further held by the Sampat Prakash judgment that Section 21 of the General Clauses Act, 1897 was also applicable so that the power under this Article can be used from time to time to meet with varying circumstances. 13. Article 370 begins with a non obstante clause stating that notwithstanding anything contained in the Constitution, first and foremost, under sub-clause (1)(a) the provisions of Article 238 shall not apply in relation to the State of Jammu & Kashmir. Article 238 has since been repealed and is not of any importance today. It only referred to the application of the provisions of Part VI to States in Part B of the 1st Schedule. Since the scheme of Article 370 was different, the said Article was stated not to apply. But more importantly, the power of Parliament to make laws for the said State shall be limited, in sub-clause (b)(i), to the matters in the Union List and the Concurrent List of the 7th Schedule to the Constitution of India, which in consultation with the Government of the State, are declared by the President to correspond to matters specified in the Instrument of Accession. If other matters contained in the said Constitution outside the Instrument of Accession in the said Lists are to be extended, then they can be extended only with the concurrence of the State. The difference between consultation and concurrence was highlighted in Prem Nath Kaul's case, supra. At this stage, it is necessary to refer to this case in some detail as it goes into the legislative history of Article 370, and the Presidential Orders made under the said Article. We are not directly concerned here with the Jammu & Kashmir Big Landed Estates (Abolition) Act, 1950, whose validity was challenged in the said judgment. The judgment goes into great detail as to how the Instrument of Accession to the Union of India was made by Maharaja Hari Singh. What is of importance is to note that after the reins of power were handed over to his son Yuvraj Karan Singh by a proclamation dated 20.6.1949, Yuvraj Karan Singh, by a proclamation dated 25.11.1949, stated that the Constitution of India, which was yet to be promulgated, would apply to the State of Jammu & Kashmir. Also, by a proclamation dated 20.4.1951, a Constituent Assembly was to be set up on the basis of adult franchise in order that this Assembly give to the State its own Constitution. The judgment then goes on to refer to the Jammu & Kashmir Presidential Order of 1950 and its amendments, which was then supplanted by the 1954 Order. It then goes on to state that, whereas sub-clause (1) (b) (i) of 370 requires only consultation with the Government of the State, sub-clause (ii) requires concurrence, which scheme applies under sub-clause (d) of the said Article in relation to the extension or modification of other provisions of the Indian Constitution as well. Under sub-clause (d), other provisions of the Constitution may, by Presidential Order, be held to apply to the State of Jammu & Kashmir. If matters specified in the Instrument of Accession are to be applied, then there is only consultation with the Government of the State, and if not, there must be concurrence. The scheme of Article 370(1), therefore, is clear. Since the Instrument of Accession is an agreement between the erstwhile Ruler of Jammu & Kashmir and the Union of India, it must be respected, in which case if a matter is already provided for in it, it would become applicable straightaway without more, and only consultation with the Government of the State is necessary in order to work out the modalities of the extension of the provisions of the Government of India Act corresponding to the Constitution of India referred to in it. However, when it comes to applying the provisions of the Constitution of India which are not so reflected in the Instrument of Accession, they cannot be so applied without the concurrence of the Government of the State, meaning thereby that they can only be applied if the State Government accepts that they ought to be so applied. Under Article 370(2), the concurrence of the Government of the State, given before the Constituent Assembly is convened, can only be given effect to if ratified by the Constituent Assembly. This legislative scheme therefore illustrates that the State of Jammu & Kashmir is to be dealt with separately owing to the special conditions that existed at the time of the Instrument of Accession. 14. Under sub-clause (1)(d) of Article 370, other provisions of the Indian Constitution shall apply in relation to the State of Jammu & Kashmir subject to such exceptions and modifications as the President may by order specify. In Puranlal Lakhanpal v. President of India, (1962) 1 SCR 688, this Court held that "modification" in sub-clause (d) is a very wide expression which includes amendment by way of change. This Court held: "The question that came for consideration in In re: Delhi Laws Act case(') was with respect to the power of delegation to a subordinate authority in making subordinate legislation. It was in that context that the observations were made that the intention of the law there under consideration when it used the word "modification" was that the Central Government would extend certain laws to Part C States without any radical alteration in them. But in the present case we have to find out the meaning of the word "modification" used in Art. 370(1) in the context of the Constitution. As we have said already the object behind enacting Art. 370(1) was to recognise the special position of the State of Jammu and Kashmir and to provide for that special position by giving power to the President to apply the provisions of the Constitution to that State with such exceptions and modifications as the President might by order specify. We have already pointed out that the power to make exceptions implies that the President can provide that a particular provision of the Constitution would not apply to that State. If therefore the power is given to the President to efface in effect any provision of the Constitution altogether in its application to the State of Jammu and Kashmir, it seems that when he is also given the power to make modifications that power should be considered in its widest possible amplitude. If he could efface a particular provision of the Constitution altogether in its application to the State of Jammu and Kashmir, we see no reason to think that the Constitution did not intend that he should have the power to amend a particular provision in its application to the State of Jammu and Kashmir. It seems to us that when the Constitution used the word "modification" in Art. 370(1) the intention was that the President would have the power to amend the provisions of the Constitution if he so thought fit in their application to the State of Jammu and Kashmir. In the Oxford English Dictionary (Vol. VI) the word 'modify" means inter alia "to make partial changes in; to change (as object) in respect of some of its qualities; to alter or vary without radical transformation". Similarly the word "modification" means "the action of making changes in an object without altering its essential nature or character; the state of being thus changed; partial alteration". Stress is being placed on the meaning "to alter or vary without radical transformation" on behalf of the petitioner; but that is not the only meaning of the words "modify" or "modification". The word "modify" also means "to make partial changes in" and "modification" means "partial alteration". If therefore the President changed the method of direct election to indirect election he was in essence making a partial change or partial alteration in Art. 81 and therefore the modification made in the present case would be even within the dictionary meaning of that word. But, in law, the word "modify" has even a wider meaning. In "Words and Phrases" by Roland Burrows, the primary meaning of the word "modify" is given as "to limit" or "restrict" but it also means mto vary" and may even mean to "extend" or "enlarge". Thus in law the word "modify" may just mean "vary", i.e., amend; and when Art. 370(1) says that the President may apply the provisions of the Constitution to the State of Jammu and Kashmir with such modifications as he may by order specify it means that he may vary (i.e., amend) the provisions of the Constitution in its application to the State of Jammu and Kashmir. We are therefore of opinion that in the context of the Constitution we must give the widest effect to the meaning of the word 'modification" used in Art. 370(1) and in that sense it includes an amendment. There is no reason to limit the word "modifications" as used in Art. 370(1) only to such modifications as do not make any "radical transformation"." [pages 692 - 693] 15. It has been argued that Parliamentary legislation would also need the concurrence of the State Government before it can apply to the State of Jammu & Kashmir under Article 370. This is a complete misreading of Article 370 which makes it clear that once a matter in either the Union List or the Concurrent List is specified by a Presidential Order, no further concurrence is needed. Indeed, the argument is that a Constitutional amendment does not ipso facto apply to the State of Jammu & Kashmir under the proviso to Article 368 as applicable in the said State unless there is concurrence of the State Government and therefore, logically, it must follow that Parliamentary legislation would also require concurrence of the State Government before it can be said to apply in the State of Jammu & Kashmir. We fail to understand or appreciate such an argument. A constitutional amendment is different in quality from an ordinary law and, as has been held by us, it is clear that the language of Article 368 proviso and the language of Article 370 are different and have to be applied according to their terms. 16. The Instrument of Accession of Jammu & Kashmir State is dated 26.10.1947, and states, in paragraphs 1, 3, 8, and 9, the following: "1. I hereby declare that I accede to the Dominion of India with the intent that the Governor General of India, the Dominion Legislature, the Federal Court and any other Dominion authority established for the purposes of the Dominion shall by virtue of this my Instrument of Accession but subject always to the terms thereof, and for the purposes only of the Dominion, exercise in relation to the State of Jammu & Kashmir (hereinafter referred to as "this State") such functions as may be vested in them by or under the Government of India Act, 1935, as in force in the Dominion of India, on the 15th day of August 1947, (which Act as so in force is hereafter referred to as "the Act'). 3. I accept the matters specified in the schedule hereto as the matters with respect to which the Dominion Legislature may make law for this State. 8. Nothing in this Instrument affects the continuance of my Sovereignty in and over this State, or, save as provided by or under this Instrument, the exercise of any powers, authority and rights now enjoyed by me as Ruler of this State or the validity of any law at present in force in this State. 9. I hereby declare that I execute this Instrument on behalf of this State and that any reference in this Instrument to me or to the Ruler of the State is to be construed as including a reference to my heirs and successors." The Schedule which is referred to in clause 3 refers to defence, external affairs, communications and certain ancillary matters. 17. At this stage, it is necessary to see which of the provisions of the Constitution of India have in fact been applied by Article 370 to the State of Jammu & Kashmir. First and foremost, in sub-clause (1) (c) of Article 370, the provisions of Article 1 and Article 370 itself are said to apply by virtue of this sub-clause straightaway. In order to find out what other provisions of the Constitution have been extended to the State of Jammu & Kashmir, we have necessarily to go to the Presidential Order of 1950. This Order, which is called the Constitution Application to Jammu & Kashmir Order, 1950, began rather warily by extending a few Entries in List I of Schedule 7 and applying only certain clauses and Articles of the Constitution. Since this Order and its amendments are of historical importance only, it is not necessary to refer to them in any detail, as it is the Constitution Application to Jammu & Kashmir Order, 1954, that superseded the 1950 Order, and went on to apply various provisions of the Constitution of India to the State of Jammu & Kashmir that we are concerned with. Insofar as this case is concerned, it is important to note that, in Part XI, in Article 246, it was stated that the words, brackets, and figures "notwithstanding anything contained in clauses 2 and 3" occurring in clause 1, and clauses 2, 3, and 4 shall be omitted. Article 254 was also, by sub-clause (f) of paragraph 6, extended with certain modifications and omissions. The 7lh schedule Union List was extended containing most of the Entries therein except what was expressly omitted by clause 22. Interestingly enough, Entry 45 and 95 with which we are directly concerned were applied for the first time by this Order, and have continued to apply to the State since. Significantly, the State List and the Concurrent List of the 7th Schedule were omitted by the original 1954 Order. 18. This order has been amended repeatedly by a number of subsequent orders, and the Order with which we are directly concerned is the 1954 Order as amended from time to time. This Order adopts all the provisions of the Constitution of India as in force on the 20th June, 1964, together with certain amendments and modifications. The argument that Article 370(1 )(b) limits' the power of Parliament is answered by the fact that the entire Constitution of India, as it exists in 1964, has been made applicable by Presidential order to the State of Jammu & Kashmir, availing both Articles 370(1) (b) and (d) for this purpose. And the expression limited to' does not occur in Article 370(1 )(d),under which it is open to adopt the entire Constitution of India subject to exceptions and modifications, as has been noted above. The opening paragraphs of this Order read as follows:- "In exercise of the powers conferred by clause (1) of article 370 of the Constitution, the President, with the concurrence of the Government of the State of Jammu and Kashmir, is pleased to make the following Order:- 1.(1) This Order may be called the Constitution (Application to Jammu and Kashmir) Order, 1954. (2) It shall come into force on the fourteenth day of May, 1954, and shall thereupon supersede the Constitution (Application to Jammu and Kashmir) Order, 1950. 2. The provisions of the Constitution as in force on the 20th day of June, 1964 and as amended by the Constitution (Nineteenth Amendment) Act, 1966, the Constitution (Twenty-first Amendment) Act, 1967, Section 5 of the Constitution (Twenty-third Amendment) Act, 1969, the Constitution (Twenty-fourth Amendment) Act, 1971, section 2 of the Constitution (Twenty-fifth Amendment) Act, 1971, the Constitution (Twenty-sixth Amendment) Act, 1971, the Constitution (Thirtieth Amendment) Act, 1972, section 2 of the Constitution (Thirty-first Amendment) Act, 1973, section 2 of the Constitution (Thirty-third Amendment) Act, 1974, sections 2, 5, 6 and 7 of the Constitution (Thirty-eighth Amendment) Act, 1975, the Constitution (Thirty-ninth Amendment) Act, 1975, the Constitution (Fortieth Amendment) Act, 1976, sections 2, 3 and 6 of the Constitution (Fifty-second Amendment) Act, 1985 and the Constitution (Sixty-first Amendment) Act, 1988 which, in addition to article 1 and article 370, shall apply in relation to the State of Jammu and Kashmir and the exceptions and modifications subject to which they shall so apply shall be as follows:-" By this Order, in Part XI of the Constitution of India, in Article 246 for the words, brackets, and figures "clauses (2) and (3)" occurring in clause (1), the word, brackets and figure "clause (2)" shall be substituted, and the words, brackets and figure "Notwithstanding anything in clause (3)," occurring in clause (2), and the whole of clauses (3) and (4) shall be omitted. This being the case, it is clear that Article 246 as applicable to the State of Jammu & Kashmir would read thus:- "246. Subject matter of laws made by Parliament and by the Legislatures of States (1) Notwithstanding anything in clause ( 2 ), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the 7th Schedule (in this Constitution referred to as the Union List) (2) Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the 7th Schedule (in this Constitution referred to as the Concurrent List)" 19. Equally, Article 248 and Entry 97 List I have been modified so that Parliament has the residuary power to make laws only with respect to three subjects - (1) the prevention of activities involving terrorist acts, (2) the prevention of activities directed towards questioning or disrupting the sovereignty and territorial integrity of India or bringing about cession of any part of the territory of India, and (3) taxes on three specified subjects. Significantly, clause (f), which contained Article 254 in a modified form, was omitted by C.O. No.66, by which it has become clear that after 1963, Article 254 in its current form in the Constitution of India will apply to the State of Jammu & Kashmir. Equally, in the 7th Schedule Union List, the omission of Entries has now come down to only four i.e. Entries 8, 9, 34, and 79, with a few other Entries being modified or substituted. Significantly, Entries 45 and 95 of List I continue to apply to the State of Jammu & Kashmir. The State List continues to be omitted altogether, and from 1963 onwards, the Concurrent List applies to the State of Jammu & Kashmir with a number of Entries being omitted. What is of importance for the decision of this case is that Entry 6 dealing with the transfer of property and Entry 11A of the Concurrent List do not apply to the State of Jammu & Kashmir. Entry 6 does not apply because it has not been extended to the State, and Entry 11A does not apply because the 42nd Amendment to the Constitution of India, which introduced Entry 11A into the Concurrent List, is itself not applicable. 20. At this stage, it is important to refer to the Constitution of Jammu & Kashmir, 1956. This Constitution came into effect on 17.11.1956. Section 2(1 )(a), and Sections 3, 4, and 5 read as follows:- "2. Definitions:- (1) In this Constitution, unless the context otherwise requires- (a) "Constitution of India" means the Constitution of India as applicable in relation to this State; 3. Relationship of the State with the Union of lndia:-The State of Jammu and Kashmir is and shall be an integral part of the Union of India. 4. Territory of the State:-The territory of the State shall comprise all the territories which on the fifteenth day of August, 1947, were under the sovereignty or suzerainty of the Ruler of the State. 5. Extent of executive and legislative power of the State:- The executive and legislative power of the State extends to all matters except those with respect to which Parliament has power to make laws for the State under the provisions of the Constitution of India." 21. What is important to note in this Constitution, which was drafted by a Constituent Assembly elected on the basis of adult franchise, is that the State of Jammu & Kashmir is stated to be an integral part of the Union of India, and that the executive and legislative power of the State extends to all matters except those with respect to which Parliament has power to make laws for the State under Article 370 of the Constitution of India. A combined reading, therefore, of Article 370 of the Constitution of India, the 1954 Presidential Order as amended from time to time, and the Constitution of Jammu & Kashmir, 1956 would lead to the following position insofar as the legislative competence of the Parliament of India vis-a-vis the State of Jammu & Kashmir is concerned: 1. All entries specified by the 1954 Order contained in List I of the 7th Schedule to the Constitution of India would clothe Parliament with exclusive jurisdiction to make laws in relation to the subject matters set out in those entries. 2. Equally, under the residuary power contained in Entry 97 List I read with Article 248, the specified subject matters set out would indicate that the residuary power of Parliament to enact exclusive laws relating to the aforesaid subject matters would extend only to the aforesaid subject matters and no further. 3. Parliament would have concurrent power with the State of Jammu & Kashmir with respect to the entries that are specified in the Presidential Order of 1954 under List III of the 7th Schedule of the Constitution of India. This would mean that all the decisions of this Court on principles of repugnancy applicable to Article 254 would apply in full force to laws made which are relatable to these subject matters. 4. Every other subject matter which is not expressly referred to in either List I or List III of the 7th Schedule of the Constitution of India, as applicable in the State of Jammu & Kashmir, is within the legislative competence of the State Legislature of Jammu & Kashmir. 22. An argument was made by learned counsel on behalf of the respondents that the subjects mentioned in the State List of the 7th Schedule to the Constitution of India as originally adopted were frozen and can never be delegated or conferred on the Parliament so long as Article 370 remains, since under Article 370(1 )(b), the President could declare that the Parliament shall have power to make laws for the State of Jammu & Kashmir only on the fields of legislation mentioned in the Union List and the Concurrent List. We are afraid that this submission is also without force for the reason that Article 368 proviso, as applicable to the State of Jammu & Kashmir, expressly allows any Constitutional amendment to the Constitution of India to be applied with the concurrence of the State of Jammu & Kashmir. This would include within its ken, an amendment which either adds to or subtracts from the State List and confers upon Parliament, either exclusively under List I or concurrently under List III, a subject matter hitherto in the State List. This has been so held in Sampat Prakash's case (supra). Also, in Puranlal Lakhanpal's case (supra), the expression "modifications" occurring in Article 370(1 )(d) has been construed not only to mean "to limit or restrict" but even "to extend or enlarge." Thus, the word "modification" must be given the widest meaning and would include all amendments which either limit or restrict or extend or enlarge the provisions of the Constitution of India. For this reason also it is clear that nothing can ever be frozen so long as the drill of Article 370 is followed. 23. Given this legislative scenario, we have now to examine SARFAESI in its applicability to the State of Jammu & Kashmir. Entries 45 and 95 of List I of the 7th Schedule of the Constitution of India read as follows:- "45. Banking. 95. Jurisdiction and powers of all courts, except the Supreme Court, with respect to any of the matters in this List; admiralty jurisdiction." 24. The first significant thing to note is that recovery of debts by banks has been held to fall within Entry 45 List I. Thus, in Union of India v. Delhi High Court Bar Association, (2002) 4 SCC 275, it has been held: "The Delhi High Court and the Guwahati High Court have held that the source of the power of Parliament to enact a law relating to the establishment of the Debts Recovery Tribunal is Entry 11-A of List III which pertains to 11 administration of justice; constitution and organisation of all courts, except the Supreme Court and the High Courts". In our opinion, Entry 45 of List I would cover the types of legislation now enacted. Entry 45 of List I relates to "banking". Banking operations would, inter alia, include accepting of loans and deposits, granting of loans and recovery of the debts due to the bank. There can be little doubt that under Entry 45 of List I, it is Parliament alone which can enact a law with regard to the conduct of business by the banks. Recovery of dues is an essential function of any banking institution. In exercise of its legislative power relating to banking, Parliament can provide the mechanism by which monies due to the banks and financial institutions can be recovered. The Tribunals have been set up in regard to the debts due to the banks. The special machinery of a Tribunal which has been constituted as per the preamble of the Act, "for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected therewith or incidental thereto" would squarely fall within the ambit of Entry 45 of List I. As none of the items in the lists are to be read in a narrow or restricted sense, the term "banking" in Entry 45 would mean legislation regarding all aspects of banking including ancillary or subsidiary matters relating to banking. Setting up of an adjudicatory body like the Banking Tribunal relating to transactions in which banks and financial institutions are concerned would clearly fall under Entry 45 of List I giving Parliament specific power to legislate in relation thereto." [para 14] 25. When it came to SARFAESI itself, this Court has held in Central Bank of India v. State of Kerala, (2009) 4 SCC 94: "Undisputedly, the DRT Act and the Securitisation Act have been enacted by Parliament under Entry 45 in List I in the 7th Schedule whereas the Bombay and Kerala Acts have been enacted by the State Legislatures concerned under Entry 54 in List II in the 7th Schedule. To put it differently, two sets of legislations have been enacted with reference to entries in different lists in the 7th Schedule. Therefore, Article 254 cannot be invoked per se for striking down State legislations on the ground that the same are in conflict with the Central legislations. That apart, as will be seen hereafter, there is no ostensible overlapping between two sets of legislations. Therefore, even if the observations contained in Kesoram Industries case [(2004) 10 SCC 201] are treated as law declared under Article 141 of the Constitution, the State legislations cannot be struck down on the ground that the same are in conflict with Central legislations." [para 36] 26. In a recent judgment, namely, UCO Bank & Anr. V. Dipak Debbarma & Ors., [Civil Appeal No. 11247 of 2016 and Civil Appeal No. 11250 of 2016] delivered by this Court on 25th November, 2016, this Court has held: "18. The Act of 2002 is relatable to the Entry of banking which is included in List I of the 7th Schedule. Sale of mortgaged property by a bank is an inseparable and integral part of the business of banking. The object of the State Act, as already noted, is an attempt to consolidate the land revenue law in the State and also to provide measures of agrarian reforms. The field of encroachment made by the State legislature is in the area of banking. So long there did not exist any parallel Central Act dealing with sale of secured assets and referable to Entry 45 of List I, the State Act, including Section 187, operated validly. However, the moment Parliament stepped in by enacting such a law traceable to Entry 45 and dealing exclusively with activities relating to sale of secured assets, the State law, to the extent that it is inconsistent with the Act of 2002, must give way. The dominant legislation being the Parliamentary legislation, the provisions of the Tripura Act of 1960, pro tanto, (Section 187) would be invalid. It is the provisions of the Act of 2002, which do not contain any embargo on the category of persons to whom mortgaged property can be sold by the bank for realisation of its dues that will prevail over the provisions contained in Section 187 of the Tripura Act of 1960." 27. In this case, a Tripura Land Reform law, which was made under Entries 18 and 45 of List II, was pitted against SARFAESI which is made under Entry 45 List I. Despite the fact that the Tripura Act received the protection of Article 31B read with Ninth Schedule, it was held that the Tripura Act, Section 187 of which put a legislative embargo on the sale of mortgaged properties by a bank to any person who is not a member of Scheduled Tribe, was held to give way to the Parliamentary enactment SARFAESI made under Entry 45 List I. Though this judgment does not apply on all fours to the present case, it clearly establishes that SARFAESI is relatable to Entry 45 List I and that any enactment made under the State List would have to give way to SARFAESI by virtue of the application of Article 246 of the Constitution of India. 28. R.C. Cooper v. Union of India, (1970) 1 SCC 248, has also in paragraph 36, stated that the subject matter 'banking' in Entry 45 List I must be construed so as to comprehend within its scope all matters that are incidental to such subject matter. It was held: "The legislative entry in List I of the 7th Schedule is "Banking" and not "Banker" or "Banks". To include within the connotation of the expression "Banking" in Entry 45, List I, power to legislate in respect of all commercial activities which a banker by the custom of bankers or authority of law engages in, would result in re-writing the Constitution. Investment of power to legislate on a designated topic covers all matters incidental to the topic. A legislative entry being expressed in a broad designation indicating the contour of plenary power must receive a meaning conducive to the widest amplitude, subject however to limitations inherent in the federal scheme which distributes legislative power between the Union and the constituent units. The field of "banking" cannot be extended to include trading activities which not being incidental to banking encroach upon the substance of the entry "trade and commerce" in List II." [para 36] 29. A judgment of the Privy Council reported in Attorney-General for Canada v. Attorney-General for the Province of Quebec, 1947 Appeal Cases 33, also throws some light on what is the correct meaning to be given to the expression "banking". A Quebec Statute deemed as vacant property, without an owner, (which will now belong to His Majesty) all deposits or credits in credit institutions and other establishments which received funds or securities on deposit where for 30 years or more such deposits or credits are not the subject of any operation or claim by the persons entitled thereto. In an appeal from the Court of King's Bench of the Province of Quebec, the Bank of Montreal argued that the State Act was beyond the powers of the Quebec legislature as "banking" was one of the subjects allotted exclusively to the Parliament of Canada. Lord Porter, in an illuminating judgment, posed the question and answered it thus:- "Is then, the repayment of deposits to depositors or their successors in title under the law as existing a part of the business of banking or necessarily incidental thereto, or is it concerned primarily with property and civil rights or incidental to those subjects? Their Lordships cannot but think that the receipt of deposits and the repayment of the sums deposited to the depositors or their successors as defined above is an essential part of the business of banking." In this view of the matter, the Privy Council further held: "In their view, a Provincial legislature enters on the field of banking when it interferes with the right of depositors to receive payment of their deposits, as in their view it would if it confiscated loans made by a bank to its customers. Both are in a sense matters of property and civil rights, but in essence they are included within the category of banking." (At pages 44 and 46) 30. What is of significance to note is that since List II is not operative in the State of Jammu & Kashmir, there is no competing Entry in the said List and this would lead therefore to the conclusion that Entries 45 and 95 of List I must be given a wide meaning. Indeed, in a converse situation, this Court, in Union of India v. H.S. Dhillon, 1972(2) SCR 33, had this to say: "It was also said that if this was the intention of the Constitution makers they need not have formulated List I at all. This is the point which was taken by Sardar Hukam Singh and others in the debates referred to above and was answered by Dr. Ambedkar. But apart from what has been stated by Dr. Ambedkar in his speech extracted above there is some merit and legal effect in having included specific items in List I for when there are three lists it is easier to construe List II in the light of Lists I and II. If there had been no List I, many items in List II would perhaps have been given much wider interpretation than can be given under the present scheme. Be that as it may, we have the three lists and a residuary power and therefore it seems to us that in this context if a Central Act is challenged as being beyond the legislative competence of Parliament, it is enough to enquire if it is a law with respect to matters or taxes enumerated in List II. If it is not, no further question arises." (At page 67) 31. At this juncture, it is important to advert to State of Jammu & Kashmir v. M.S. Farooqui, (1972) 1 SCC 872. This judgment dealt with the interplay between the Jammu & Kashmir Government Servants Prevention of Corruption (Commission) Act, 1962 as against the All India Services (Discipline and Appeal) Rules, 1955. In para 7 of the judgment it was noticed that Parliament could legislate by virtue of Entry 70 List I on All India Services, and Rules made under Article 309 of the Constitution are referable to this Entry. This being the case, the question that this Court had to answer was as to whether the appellant, who was a member of the Indian Police Service, which is an All India Service, in the Jammu & Kashmir cadre, was liable to be governed by the All India Services Rules or by the Jammu & Kashmir Act. After dealing in some detail with judgments of this Court on legislative competence, this Court concluded:- "From the perusal of the provisions of the two statutory laws, namely, the All India Services (Discipline and Appeal) Rules, 1955, and the Jammu and Kashmir government servants1 Prevention of Corruption (Commission) Act, 1962, it is impossible to escape from the conclusion that the two cannot go together. The impugned Act provides for additional punishments not provided in the Discipline and Appeal Rules. It also provides for suspension and infliction of some punishments. It seems to us that insofar as the Commission Act deals with the infliction of disciplinary punishments it is repugnant to the Discipline and Appeal Rules. Parliament has occupied the field and given clear indication that this was the only manner in which any disciplinary action should be taken against the members of the All India Services. Insofar as the Commission Act deals with a preliminary enquiry for the purposes of enabling any prosecution to be launched it may be within the legislative competence of the Jammu and Kashmir State and not repugnant to the provisions of the Discipline and Appeal Rules. But as the provisions dealing with investigation for possible criminal prosecution are inextricably intertwined with the provisions dealing with infliction of disciplinary punishment the whole Act must be read down so as to leave the members of the All India Service outside its purview. We accordingly hold that the provisions of the Commission Act do not apply to the members of the All India Services. Accordingly we dismiss the appeal. As the respondent was not represented there would be no order as to costs. We thank Mr. G.L. Sanghi for assisting us as amicus curiae." [paras 47 - 48] 32. Applying the doctrine of pith and substance to SARFAESI, it is clear that in pith and substance the entire Act is referable to Entry 45 List I read with Entry 95 List I in that it deals with recovery of debts due to banks and financial institutions, inter alia through facilitating securitization and reconstruction of financial assets of banks and financial institutions, and sets up a machinery in order to enforce the provisions of the Act. In pith and substance, SARFAESI does not deal with "transfer of property". In fact, in so far as banks and financial institutions are concerned, it deals with recovery of debts owing to such banks and financial institutions and certain measures which can be taken outside of the court process to enforce such recovery. Under Section 13(4) of SARFAESI, apart from recourse to taking possession of secured assets of the borrower and assigning or selling them in order to realise their debts, the banks can also take over the management of the business of the borrower, and/or appoint any person as manager to manage secured assets, the possession of which has been taken over by the secured creditor. Banks as secured creditors may also require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom money is due or payable to the borrower, to pay the secured creditor so much of the money as is sufficient to pay the secured debt. It is thus clear that the transfer of property, by way of sale or assignment, is only one of several measures of recovery of a secured debt owing to a bank and this being the case, it is clear that SARFAESI, as a whole, cannot possibly be said to be in pith and substance, an Act relatable to the subject matter "transfer of property". At this juncture it is necessary to point out that insofar as the State of Jammu & Kashmir is concerned, Sections 17A and Section 18B of SARFAESI, which apply to the State of Jammu & Kashmir, substituted 'District Judge' and the 'High Court' for the 'Debts Recovery Tribunal' and the 'Appellate Tribunal' respectively. These provisions read as under:- "Section 17-A. Making of application to Court of District Judge in certain cases. In the case of a borrower residing in the State of Jammu and Kashmir, the application under Section 17 shall be made to the Court of District Judge in that State having jurisdiction over the borrower which shall pass an order on such application. Explanation.-For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons shall not entitle the person (including borrower) to make an application to the Court of District Judge under this section. Section 18-B. Appeal to High Court in certain cases. Any borrower residing in the State of Jammu and Kashmir and aggrieved by any order made by the Court of District Judge under Section 17-A may prefer an appeal, to the High Court having jurisdiction over such Court, within thirty days from the date of receipt of the order of the Court of District Judge: Provided that no appeal shall be preferred unless the borrower has deposited, with the Jammu and Kashmir High Court, fifty per cent of the amount of the debt due from him as claimed by the secured creditor or determined by the Court of District Judge, whichever is less: Provided further that the High Court may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent of the debt referred to in the first proviso." 33. It would be clear that these provisions are referable to Entry 45 as being ancillary to banking, and expressly to Entry 95 List I inasmuch as the jurisdiction and power of courts is laid down for the special subject of recovery of debts due to banks by these provisions. 34. In State of Maharashtra v. Narottamdas Jethabai, (1950) 1 SCR 51, this Court upheld the Bombay City Civil Courts Act, and in so doing, referred specifically to the following Entries in the legislative lists of the Government of India Act, 1935. Entry 53, List I: "Jurisdiction and powers of all courts except the Federal Court, with respect to any of the matters in this List...." Entries 1 and 2, List II: "1. . . . the administration of justice; constitution and organisation of all courts except the Federal Court "2. Jurisdiction and powers of all courts except the Federal Court, with respect to any of the matters in this List ...." Entry 15, List III: "Jurisdiction and powers of all courts except the Federal Court, with respect to any of the matters in this List." 35. Justices Fazal Ali, Mahajan, and Mukherjea held that 'Administration of Justice' contained in Entry 1 of List 2 of the Government of India Act, 7th Schedule, would include jurisdiction and power of courts generally, but that Entry 53 of List 1 would refer to special powers referable to a particular entry in the Union List as opposed to the general power contained in Entry 1 List 2. It was held, therefore, that but for an express provision like Entry 53 List 1, Parliament may not have been able to confer special jurisdiction on courts in regard to matters set out in legislative List 1. Two learned Judges, namely, Patanjali Sastri and Das, JJ. also upheld the Bombay Act, but on the basis that the expression "Administration of Justice" would be cut down by the expression "jurisdiction and power of all courts", and would not therefore include within its ken jurisdiction and power of courts. 36. Similarly in Jamshed N. Guzdar v. State of Maharashtra, (2005) 2 SCC 591, this Court upheld the constitutional validity of the Bombay City Civil Court and the Bombay Courts of Small Causes (Enhancement of Pecuniary Jurisdiction and Amendment) Act, 1986 by holding in paragraph 53 as follows: "Thus, on and after 3-1-1977 the situation appears to be as under: (a) Parliament alone has the competence to legislate with respect to Entry 78 of List I to "constitute and organise" the High Court. (b) Both Parliament and the State Legislature can invest such a High Court with general jurisdiction by enacting an appropriate legislation referable to "administration of justice" under Entry 11-Aof List III. (c) Parliament may under Entry 95 of List I invest the High Court with jurisdiction and powers with respect to any of the matters enumerated in List I. (d) The State Legislature may invest the High Court with the jurisdiction and powers with respect to any of the matters enumerated in List II. (e) Both Parliament and the State Legislature may by appropriate legislation referable to Entry 46 of List III invest the High Court with jurisdiction and powers with respect to any of the matters enumerated in List III." [para 53] 37. It is thus clear on a reading of these judgments that SARFAESI as a whole would be referable to Entries 45 and 95 of List I. We must remember the admonition given by this Court in A.S. Krishna and others v. State of Madras, 1957 SCR 399, that it is not correct to first dissect an Act into various parts and then refer those parts to different Entries in the legislative Lists. It is clear therefore that the entire Act, including Sections 17A and 18B, would in pith and substance be referable to Entries 45 and 95 of List I, and that therefore the Act as a whole would necessarily operate in the State of Jammu & Kashmir. 38. The judgment of the High Court is wholly incorrect in referring to Entry 11A of the Concurrent List. First and foremost, as has been noted by us above, the Entry is not extended to the State of Jammu & Kashmir. From this, the counsel for the respondents sought to contend that Parliament would, therefore, have no power under the Concurrent List to legislate on the subject matter "Administration of Justice". Under Section 5 of the Jammu & Kashmir Constitution, we have seen that "Administration of Justice" would come into play only when Entries 45 and 95 of List 1 are not attracted. Even if this were not so, we have seen in the two judgments cited hereinabove, the expression "administration of justice" is general and must give way to the special laws that are enacted under Entry 95 List I when coupled with another Entry in the same List - in this case Entry 45 List I. The relevant part of Section 140 of the Jammu & Kashmir Transfer of Property Act, on which great reliance has been placed by learned counsel for the respondents, provides:- "140. Exemptions of certain instruments from restriction imposed on transfer of immovable property. Nothing contained in Irshad dated 29th Maghar, 1943, or any law, rule order, notification, regulation, hidyat, ailan, circular, robkar, yadasht, irshad, State Council resolution or any other instrument having the force of law prohibiting or restricting the transfer of immovable property in favour of a person who is not a permanent resident of the State shall apply to- (h) a simple mortgage of immovable property executed or created in favour of a public financial institution, I as specified in section 4-A of the Companies Act, 1956, a Scheduled bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 and the Trustees for the holders of debentures to secure the loans, guarantees, issue of debentures or other form of financial assistance provided for developmental projects in the State of Jammu and Kashmir Like Baghliar Project of Jammu and Kashmir State Power Development Corporation Limited. Provided that in any suit based on such mortgage, the mortgaged property shall be sold or transferred only to a permanent resident of the State or any financial institution or corporation managed and owned by the Government of India; 39. At this juncture, it is necessary to refer to Rule 8(5) proviso of the Security Interest (Enforcement) Rules, 2002, which states as follows:- "Provided that in case of sale of immovable property in the State of Jammu and Kashmir, the provisions of Jammu and Kashmir Transfer of Property Act, 1977 shall apply to the person who acquires such property in the State.". 40. This Rule makes it amply clear that Section 140 of the Transfer of Property Act of Jammu & Kashmir will be respected in auction sales that take place within the State. This being the case, it is clear that there is no collision or repugnancy with any of the provisions of SARFAESI, and therefore it is clear that the High Court is absolutely wrong in finding that as Section 140 of the Transfer of Property Act will be infracted, SARFAESI cannot be held to apply to the State of Jammu & Kashmir. Rule 8 has been noticed but brushed aside by the aforesaid judgment. The High court judgment begins from the wrong end and therefore reaches the wrong conclusion. It states that in terms of Section 5 of the Constitution of Jammu & Kashmir, the State has absolute sovereign power to legislate in respect of laws touching the rights of its permanent residents qua their immovable properties. The State legislature having enacted Section 140 of the Jammu & Kashmir Transfer of Property Act, therefore, having clearly stated that the State's subjects/citizens are by virtue of the said provision protected, SARFAESI cannot intrude and disturb such protection. The whole approach is erroneous. As has been stated hereinabove, Entries 45 and 95 of List I clothe Parliament with exclusive power to make laws with respect to banking, and the entirety of SARFAESI can be said to be referable to Entry 45 and 95 of List I, 7th Schedule to the Constitution of India. This being the case, Section 5 of the Jammu & Kashmir Constitution will only operate in areas in which Parliament has no power to make laws for the State Thus, it is clear that anything that comes in the way of SARFAESI by way of a Jammu & Kashmir law must necessarily give way to the said law by virtue of Article 246 of the Constitution of India as extended to the State of Jammu & Kashmir, read with Section 5 of the Constitution of Jammu & Kashmir. This being the case, it is clear that Sections 13(1) and (4) cannot be held to be beyond the legislative competence of Parliament as has wrongly been held by the High Court. 41. It is rather disturbing to note that various parts of the judgment speak of the absolute sovereign power of the State of Jammu & Kashmir. It is necessary to reiterate that Section 3 of the Constitution of Jammu & Kashmir, which was framed by a Constituent Assembly elected on the basis of universal adult franchise, makes a ringing declaration that the State of Jammu & Kashmir is and shall be an integral part of the Union of India. And this provision is beyond the pale of amendment. Section 147 of the Jammu & Kashmir Constitution states:- "147. Amendment of the Constitution. - An amendment of this Constitution may be initiated only by the introduction of a Bill for the purpose in the Legislative Assembly and when the Bill is passed in each House by a majority of not less than two-thirds of the total membership of the House, it shall be presented to the Sadar-i-Riyasat for his assent and, upon such assent being given to the Bill, the Constitution shall stand amended in accordance with the terms of the Bill: Provided that a Bill providing for the abolition of the Legislative Council may be introduced in the Legislative Assembly and passed by it majority of the total membership of the Assembly and by a majority of not less than two-thirds of the members of the Assembly present and voting: Provided further that no Bill or amendment seeking to make any change in: (a) this section; (b) the provisions of the sections 3 and 5; or (c) the provisions of the Constitution of India as applicable in relation to the State; shall be introduced or moved in either House of the Legislature." 42. It is also significant in this context to refer to the Preamble to the Constitution of Jammu & Kashmir, 1957 and compare it to that of the Constitution of India, 1950. The Preamble of the Constitution of Jammu and Kashmir reads as follows: "WE, THE PEOPLE OF THE STATE OF JAMMU AND KASHMIR, having solemnly resolved, in pursuance of the accession of this State to India which took place on the twenty-sixth day of October, 1947, to further define the existing relationship of the State with the Union of India as an integral part thereof, and to secure to ourselves- JUSTICE, social, economic and political; LIBERTY of thought, expression, belief, faith and worship; EQUALITY of status and of opportunity; and to promote among us all; FRATERNITY assuring dignity of the individual and the unity of the nation; IN OUR CONSTITUENT ASSEMBLY this seventeenth day of November, 1956, do HEREBY ADOPT, ENACT AND GIVE TO OURSELVES THIS CONSTITUTION." It is to be noted that the opening paragraph of the Constitution of India, namely "WE THE PEOPLE OF INDIA, having solemnly resolved to constitute India into a SOVEREIGN SOCIALIST SECULAR DEMOCRATIC REPUBLIC and to secure to all its citizens..." has been wholly omitted in the Constitution of Jammu & Kashmir. There is no reference to sovereignty. Neither is there any use of the expression "citizen" while referring to its people. The people of Jammu & Kashmir for whom special rights are provided in the Constitution are referred to as "permanent residents" under Part III of the Constitution of Jammu & Kashmir. Above all, the Constitution of Jammu & Kashmir has been made to further define the existing relationship of the State with the Union of India as an integral part thereof. 43. It is thus clear that the State of Jammu & Kashmir has no vestige of sovereignty outside the Constitution of India and its own Constitution, which is subordinate to the Constitution of India. It is therefore wholly incorrect to describe it as being sovereign in the sense of its residents constituting a separate and distinct class in themselves. The residents of Jammu & Kashmir, we need to remind the High Court, are first and foremost citizens of India. Indeed, this is recognized by Section 6 of the Jammu & Kashmir Constitution which states: "6. Permanent residents:-(1) Every person who is, or is deemed to be, a citizen of India under the provisions of the Constitution of India shall be a permanent resident of the State, if on the fourteenth day of May, 1954- (a) he was a State Subject of Class I or of Class II; or (b) having lawfully acquired immovable property in the State, he has been ordinarily resident in the State for not less than ten years prior to that date. (2) Any person who, before the fourteenth day of May, 1954, was a State Subject of Class I or of Class II and who having migrated after the first day of March, 1947, to the territory now included in Pakistan, returns to the State under a permit for resettlement in the State or for permanent return issued by or under the authority of any law made by the State Legislature shall on such return be a permanent resident of the State. (3) In this section, the expression "State Subject of Class I or of Class II" shall have the same meaning as in State Notification No. 1-L/84 dated the twentieth April, 1927, read with State Notification No. 13/L dated the twenty 7th June, 1932." They are governed first by the Constitution of India and also by the Constitution of Jammu & Kashmir. This is made clear by Section 10 of the Jammu & Kashmir Constitution which states: "10. Rights of the permanent residents:- The permanent, residents of the State shall have all the rights guaranteed to them under the Constitution of India." We have been constrained to observe this because in at least three places the High Court has gone out of its way to refer to a sovereignty which does not exist. 44. Again it is wholly incorrect to refer to Entry 11A of List 3 and to state that since it is not extended to the State of Jammu & Kashmir, Parliament would have no legislative competence to enact Sections 17A and 18B of SARFAESI. There are at least three errors in this conclusion. First and foremost, it is not possible to dissect the provisions of SARFAESI and attach them to different Entries under different Lists. As has been held by us, the whole of SARFAESI is referable to Entry 45 and 95 of List I. Secondly, what has been missed by the impugned judgment is that Entry 95 List I is a source of legislative power for Parliament for conferring power and jurisdiction on the District Court and the High Court respectively in respect of matters contained in SARFAESI. And third, the subject "Administration of Justice" is only general and can be referred to only if Entry 95 List I read with Entry 45 List I are not attracted. We are afraid that despite the judgment in Narottamdas Jethabai and Jamshed Guzdar's case (supra), the High Court, even though it refers to Narottamdas Jethabai, has completely missed this crucial aspect. Most importantly, even if it is found that Section 140 of the Jammu & Kashmir Transfer of Property Act entitles only certain persons to purchase properties in the State of Jammu & Kashmir, yet, as has been held hereinabove, Rule 8(5) proviso which recognizes this provision, has been brushed aside. In any case an attempt has first to be made to harmonise Section 140 of the Jammu & Kashmir Transfer of Property Act with SARFAESI, and if such harmonization is impossible, it is clear that by virtue of Article 246 read with Section 5 of the Jammu & Kashmir Constitution, Section 140 of the Jammu & Kashmir Transfer of Property Act has to give way to SARFAESI, and not the other way around. 45. Reliance has also been placed on Article 35A of the Constitution as it applies to the State of Jammu & Kashmir. The said Article reads as follows: "35A. Saving of laws with respect to permanent residents and their rights- Notwithstanding anything contained in this Constitution, no existing law in force in the State of Jammu and Kashmir, and no law hereafter enacted by the Legislature of the State,- (a) Defining the classes of persons who are, or shall be, permanent residents of the State of Jammu and Kashmir; or (b) Conferring on such permanent residents any special rights and privileges or imposing upon other persons any restrictions as respects- (i) employment under the State Government; (ii) acquisition of immovable property in the State; (iii) settlement in the State; or (iv) right to scholarships and such other forms of aid as the State Government may provide, Shall be void on the ground that it is inconsistent with or takes away or abridges any rights conferred on the other citizens of India by any provision of this Part." 46. We fail to understand how Article 35A carries the matter any further. This Article only states that the conferring on permanent residents of Jammu & Kashmir special rights and privileges regarding the acquisition of immovable property in the State cannot be challenged on the ground that it is inconsistent with the fundamental rights chapter of the Indian Constitution. The conferring of such rights and privileges as mentioned in Section 140 of the Jammu & Kashmir Transfer of Property Act is not the subject matter of challenge on the ground that it violates any fundamental right of the Constitution of India. Furthermore, in view of Rule 8(5) proviso, such rights are expressly preserved. 47. We find that the High Court judgment ultimately states: "It is held that the Union Parliament does not have legislative competence to make laws contained in section 13, section 17(A), section 18(B) section 34, 35 and section 36, so far as they relate to the State of J&K; It is further held that in view of the aforesaid declaration, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 cannot be enforced in the State of J&K; It is further held that the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest 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." Having held that the provisions of SARFAESI cannot be applied to the State of Jammu & Kashmir, it is a contradiction in terms to state that SARFAESI can be availed of by banks which originate from the State of Jammu & Kashmir for securing monies which are due to them and which have been advanced to borrowers who are not the residents of the State of Jammu & Kashmir. 48. We therefore set aside the judgment of the High Court. As a result, notices issued by banks in terms of Section 13 and other coercive methods taken under the said Section are valid and can be proceeded with further. The appeals are accordingly allowed with no order as to costs.

.......................J. (Kurian Joseph)

.......................J. (R.F. Nariman)

New Delhi;

December 16, 2016.

SC : Only Parliament can take call on Article 370

Neeraj Rohmetra , SC says only Parliament can take call on Article 370 "Daily Excelsior" 1/11/2015

The Supreme Court has ruled that only Parliament can take a call on scrapping Article 370 of the Constitution of India, which accords special status to the State of Jammu and Kashmir and dismissed a Public Interest Litigation (PIL) filed by Purshotam Yadav.

A division bench of Supreme Court headed by Chief Justice HL Dattu and comprising Justice Amitava Roy dismissed the petition filed by Yadav ruling that it was only the Parliament that can take the call on Article 370.

The significant ruling by the Supreme Court came only days after Jammu and Kashmir High Court observed that Article 370 is a ‘permanent’ provision of the Constitution.

The PIL filed by Purshotam Yadav wanted removal of Article 370 from the Constitution of India that grants special status to Jammu and Kashmir.

Refusing to entertain the PIL, the Supreme Court said that the court cannot issue such directives. “Will it be done by the Court or by Parliament? Can we ask Parliament to delete a provision from the Constitution? It is not for this court to do so,” the bench observed.

An Andhra Pradesh based lawyer, Yadav argued before the Supreme Court that the issue required interference by the apex court. However, the bench turned down his plea.

“We can strike down a provision if it is unconstitutional but we cannot ask Parliament to remove a provision. It has to be done by them (Parliament),” the bench said and asked Yadav to file a better petition if he intends to pursue this matter any further.

Yadav, in his petition, had requested the court to quash Article 370 and make all laws, which are applicable to other States, also valid for Jammu and Kashmir. The plea also sought direction for removal of the words “except Jammu and Kashmir” from all the pertinent statutes where laws are made applicable to all other States and Union Territories.

According to Yadav, Article 370 and the consequent Presidential Order abridge the Constitutional scheme and also violate Part III, which relates to the fundamental rights of people and comprises the basic structure. He pointed out that Article 370 has been titled as a “temporary provision” that makes it amply clear that it had to go after some time.

Earlier this month, the J&K High Court had observed that notwithstanding its title “temporary provision”, Article 370 is a permanent provision of the Constitution. “It cannot be abrogated, repealed or even amended as mechanism provided under Clause (3) of Article 370 is no more available,” the court observed in its judgment on a case challenging the reservation benefit in promotions to the employees.

Noting that Article 35A protected the existing laws of the State, the High Court said that Jammu and Kashmir had retained limited sovereignty while acceding to the Dominion of India, and did not merge with the Dominion of India like the other princely states that signed the Instrument of Accession.

It said that the Constituent Assembly of 1957 was empowered to recommend to the President that Article 370 be declared to cease to be operative or operate only with the exceptions and modifications, but it did not make such a recommendation before its dissolution on January 25, 1957. It had added Article 370 embodied “conceptual framework of relationship” between the Union of India and J&K.

State flag

2016 Jan: HC stays ruling on hoisting of state flag

The Times of India Jan 02 2016

Saleem Pandit

The Jammu & Kashmir high court on Friday stayed the December order of a single-judge bench directing that the state flag be hoisted alongside the Tricolour on official cars and buildings in line with the J&K constitution.

Justice Hasnain Masoodi had issued the order on a petition challenging the rescinding of a government directive, issued this March, that constitutional heads hoist the two flags together. The order was issued by the PDP-led government, before being cancelled a day later under pressure from ally BJP.

A division bench of the HC, comprising justices B L Bhat and Tashi Rabstan, also stayed Masoodi's comments that the state constitution's sixth amendment in 1965 -replacing the Sadr-e-Riyasat with a governor -was “unconstitutional“, and that Article 370 cannot be abrogated, repealed or even amended.

They issued notices to the relevant parties seeking their response in four weeks, after which the bench will hear arguments in the case.

BJP functionary Farooq Khan, a retired IPS officer, had challenged Masoodi's order.Khan's lawyer Sunil Sethi said the division bench's order was a “face-saver for BJP“, whose ministers in the state had refused to use the state flag. The BJP member had argued that no flag could have the same place as the Tricolour.

State Subject law

State Subject law

Does domicile certificate dilute State Subject law ?

K B Jandial , Does domicile certificate dilute State Subject law ? "Daily Excelsior" 4/1/2017

There appears to be no end to controversies in Kashmir that vitiate the peace and tranquility of once called “Paradise on Earth” more often than not. The enemies of peace in almost every situation are no other than the separatists who claim to represent the sentiments of a particular segment of population that sells the unachievable idea of “azadi” and in the process ruin Kashmir’s peace and economy.Mainstream opposition parties too don’t miss opportunities to exploit such public protests to run down the Govt of the day.

After a prolonged turmoil following Burhan Wani’s killing in an encounter that spread over the entire tourist season and working period, Kashmir is again on the threshold of a new phase of disturbances. This time, the issue raised by separatists is the grant of Domicile Certificates to the West Pakistan refugees living in Jammu for the last seven decades without any tangible rights akin to “State Subjects” due the State’s old peculiar law that confers special privileges to them to the exclusion of other Indian citizens. Surprisingly, the 3-time CM and the president of State’s premier and secular party, Dr. Farooq Abdullah too has lent his weight to the separatists on this issue claiming it as “dilution of State Subject law and identity”.

Indeed,the special PRC law is discriminatory in nature but has constitutional protection. Consequently, these refugees have been deprived of basic rights but however,are entitled to rights available to other Indian citizens like jobs that are not under the State Govt and participation in Lok Sabha election.

In the deplorable phase of communal frenzy and bloodbath that marked the birth of two nations in 1947, non-Muslims migrated from Pakistan to different parts of India. Out of about 47 lakhs Hindus and Sikhs who migrated to safer locations in India as refugees, 5764 families mainly from Sialkot, one of the richest cities of West Pakistan, and Shakargarh had entered Jammu. It was Sheikh Abdullah who was then heading the State administration, allowed the refugees to stay in the border villages. Today, their number is 19760 families including 20 Muslims. Barring these families, all other refugees who migrated to other parts of the country have since assimilated into their new homes without carrying any taboo of being ‘refugees’. But this was not so in Jammu where they are ‘alien in their own country’.

Political leaders continued to roll out promises to these unfortunate refugees for their permanent solution but the State laws and Kashmir leadership always came in the way. No political leader in India or J&K had courage to brush aside all these obstructions; legal or political, and do justice to them. Modi during his election campaigns in Jammu in 2014 and 2015 too parroted similar promise to them as also other categories of refugees in the Jammu. The PDP-BJP Agenda for Governance also included this issue for action. It records under heading “Social & Humanitarian Initiatives” that “For the deprived groups, the coalition Government will work out a one-time settlement for refugees from Pakistan Occupied Kashmir of 1947, 1965 & 1971; take measures for sustenance and livelihood of the West Pakistan refugees…”

A pleasant announcement came in early December 2016 that the State Government would issue Domicile Certificates to all these refugees who could not be given Permanent Resident certificates under State laws. Naib Tehsildars were authorized by the State Govt to issue certificates whose format too has been communicated.Even as citizens of India they were facing problems in getting Central Government jobs for want of domicile certificate. The certificate records their original place of residence in Pakistan before migration and the present place of residence. It verifies two facts, one is that the certificate holder is a Displaced Person (DP)from West Pakistan and the second is the present domicile. It is not Permanent Resident Certificate which has its own history and legal requirements.

It was in 1927 when the local people agitated to the Maharaja Hari Singh that Punjabi were coming to J&K to grab major share of jobs and acquire land that deprived the natives of these limited opportunities. Kashmiri Pandits who constituted the major educated class amongst the locals were the worst affected by this trend. To protect the interests of the locals, a State notification bearing No. I-L/84 dated 20th April, 1927 was issued followed by another State Notification No 13/L dated 27th June, 1932 that categorized the residents in Class I, Class II and Class III. This law was allowed to continue even after Independence to protect the interest of the ‘State Subjects’ under Delhi Agreement of 1950 and subsequently by the State and Union Constitutions.

Section 6 of State Constitution defines the Permanent Residents as “(1) Every person who is, or is deemed to be , a citizen of India under the provisions of the Constitution of India shall be a permanent residents of the State, if on the 14th day of May, 1954- (a) he was a State Subject of Class I or of Class II: or (b) having lawfully acquired immovable property in the State, he has been ordinarily resident in the State for not less than ten years prior to that date…”

Section 8 of the Constitution empowers the State Legislature to “make any law defining the classes of persons who are, or shall be, permanent residents of the State,” while Section 9 gives power to legislature to (a) ” defining or altering the definition of the classes of the persons who are, or shall be, permanent residents of the State: (b) conferring on permanent residents any special rights or privileges” (c) regulating or modifying any special rights or privileges enjoyed by the permanent residents”

The State Constitution did not define ‘Permanent Residents’ but referred to the Maharaja’s notifications of 1927 & 1932. These privileges and rights are in gross violation of the fundamental rights of Indian citizens being discriminatory on grounds of place of birth (Art. 15 (1), equality of opportunities for employment (Art. 16 (1), right to acquire, hold and dispose of property ( Art. 19 (1) ( f), and right to reside and settle in any part of India ( Art. 19 (1) ( e).The Govt of India had agreed to protect these special rights of the’State Subject’ but to avoid misunderstanding the words ‘State Subject’ were agreed to be substituted by words ‘Permanent Residents’ even in the State Constitution. With the Constituent Assembly ratifying the Accession on 5th February, 1954, and issuance of Presidential Order on May14, 1954 under Article 370, Part-II of Indian Constitution was extended from May 14, 1954 recognising ‘State Subjects’ as Indian citizens from Jan.26, 1950, but Part-III ( Fundamental rights) extended from the date of issuance of the Order i.e May14, 1954. Consequently, the Constituent Assembly made related provisions for ‘ Permanent Residents’ by inserting Sections 5A to 5F first in the Kashmir Constitution Act of 1939 under which the State was run till the new Constitution of the State was adopted and enforced on Jan 26, 1957.

It is noteworthy that special rights and privileges to ‘Permanent Residents’ under State Constitution are not static and can be ” defined and amended” by the State legislature in terms of the power conferred on it by Sections 8 & 9. So, the Legislature can define ‘Permanent Residents’ to include or exclude any group of people on any exigency. The State had used this power once for granting ‘Permanent Resident’ status to Tibetan Muslims in Kashmir. They were not only settled in a separate Tibetan Colony in Srinagar but also allowed jobs under the Govt. No issue, it was compassionate consideration. But why West Pakistan refugees were deprived of this facility? Is their religion a real problem?

Separatists are fueling the issue of Domicile Certificate to West Pakistan refugees in Jammu by misleading people of Kashmir that it would change the demography of J&K. As per 2011 Census Report, the Muslim population the State was about 68% (85.67 lakh out of total population of 1.25 cr with decadal addition of 17.74 lakh against 5.61 lakh of Hindus),and how can less than 20,000 Hindus and Sikh families living here since 1948 would change the demography? They are motivated by more of communal consideration and not as much of claimed change of demography or any other rationale. Moreover, Domicile Certificate is neither PRC nor the State PRC law changed to bring these DPs in the fold of the State. This is sheer disinformation.

Why the separatists and other mainstream Kashmir centric parties are silent on the increasing presence of Rohingya and Bangladeshi refugees in Jammu? Is their silence because of their being co-religionists?

According to Govt. figures given in the last session of the Assembly, about 13,400 Rohingyas and Bangladeshi refugees are living in Jammu. Bathindi, a Muslim colony in Jammu city, alone housed 686 Rohingyas. This ethnic group, along with thousands of their Muslims was forced to leave their homes after a crackdown on them by the Myanmar junta about five years ago. Despite illegal settlers in Jammu they talk about”Jammu being hundred times better than their native Myanmar as all religious groups live here in harmony”. However, security agencies view them as a security risk in view of Pakistan’s exploitation of vulnerable groups for subversion.

NC is gearing up for bigger ruckus in the budget session of the State Legislature, making it an issue of “dilution of State’s special identity”. But how? It is never explained. While this unlawful settlement of foreigners is going on for last four to five years but both BJP Govt in the Centre and now in the State is maintaining intriguing silence of fast changing demography of the Winter Capital.

Many of the womenfolk amongst them have married the local Muslims and thus legally became ‘State Subjects’ while their relations have bribed their way to get this status through manipulation. Obviously, the separatists and Kashmir based parties don’t view this trend as threat to demographic structure of J&K.Even if the people of Kashmir may not fall in the trap of separatists for another spell of upheaval, the stand taken by them have exposed their communal politics.

(feedback: kbjandial@gmail.com)