SAMAAN LATEEF

Srinagar, July 4: The state government has challenged the implementation of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SRFAESIA), 2002 on grounds that it was contradicting Article 370.
 SRFAESIA authorizes banks or financial institutions in the state to take possession of the assets in case the concerned asset was declared as a non-performing asset, without the intervention of the courts.
 As banks and financial institutions in India do not have the power to take possession of securities and sell them, the Central government enacted and implemented SRFAESIA Act in 2002 citing reason as to improve the economy and condition of the banks and financial institutions.
 Under this act, a creditor including a bank or any financial institution takes possession of securing assets of the borrower. This act also gives banks and financial institutions right to transfer by way of lease assignment or sale for realizing the secured asset through provisions of Transfer of Property Act.
 The state government in support of a writ petition filed by Sushil Verma of Jammu against the Union Ministry of Law, Justice and Company Affairs challenged the Act and said that under the constitutional arrangement, the making of laws dealing with transfer of property is within the exclusive legislative competence of the state legislature.
 The state government through advocate general Ishaq Qadiri said it had exclusive legislative powers to make laws with regard to all matters except defence, foreign affairs, finance and communication to which Parliament has power to make laws.
 “It is amply clear that under the constitutional scheme, Centre has not to acquire or requisition immovable property in the state directly but has to have it through the state government,” said Qadiri, adding this special constitutional arrangement can’t be diluted by other laws even as the same were subservient to the provisions of the Constitution as applicable to the state.
 It was in 2003 that the petitioner became guarantor for a loan amount obtained by his father Dev Raj Verma from Central Bank of India.
 Saying he was not concerned with the business of his father, the petitioner (Sushil Verma) said due to medical ailments his father died on September 11, 2009 and the business went into losses. Later the Central Bank of India’s Regional Officer Queens Road Amritsar Punjab under Securitization Act issued notice to the petitioner to deliver the possession of the secured assets on November 25, 2009 as the amount Rs 1943510 due to the Bank has not been paid.
 However, the bank authorities without waiting for petitioner’s response conducted the auction of his house at NITCO lane Talab Tillo Jammu.
 On the auction of petitioner’s house, the state government said, “The mortgaged property shall be sold only to a permanent resident of the state. The mortgage in favor of financial institutions and banks is subject to this paramount condition and prohibition. As the very transfer of mortgage property is subject to the permanent resident condition and as such any subsequent action has to be in conformity with the basic conditions of the mortgage deed and the laws under which it is executed.”
 The government said on contrary the Securitization Act 2002 has certain provisions which are against the very basic scheme of distribution of legislative powers of the state, adding that various state laws impose restrictions on transfer of property to non-state subjects including banks like Central Bank of India, Punjab National Bank and other financial institutions belonging to non-state subjects.
 Sushil through the petition said the act was not applicable to Jammu and Kashmir as the consent of the state legislature had not been taken for the applicability of the act.
 Challenging the validity of the act he said, “Once the Act is not applicable to J&K the impugned notices issued are liable to be quashed,” he said.
 Sushil said under the Article 370 no law passed by the Parliament could be made applicable to J&K without the concurrence of the state legislature. He said under Section 5 of Constitution of J&K, “the executive and the legislative powers of the state extends to all matters except those to which the Parliament has powers to make laws, for the state and under the provisions of the constitution of India.”
 Since the state legislature has not given its concurrence to the act and thus its provisions could not be invoked by any of the financial institutions in Jammu and Kashmir, he added.
 Talking to Greater Kashmir the advocate general said under section 5 of the constitution of J&K read with article 370 of the constitution of India, no law passed by the Parliament could be made applicable to the state without the concurrence of the state legislature.
 “Article 370 of the constitution of India specifies that except for defence, foreign affairs, finance and communication the Indian parliament needs the state government’s concurrence for applying other laws,” said Qadiri.
 “Therefore, as concurrence of the state government has not been taken, the provisions of the Securitization Act of 2002 do not apply to J&K,” Qadiri said, adding the 'Parliament has no authority to implement laws without the concurrence of the state legislature.'

Lastupdate on : Sun, 4 Jul 2010 21:30:00 Makkah time
Lastupdate on : Sun, 4 Jul 2010 18:30:00 GMT
Lastupdate on : Mon, 5 Jul 2010 00:00:00 IST