Divided on Sarfaesi Act, Kashmir Bar may not support separatists’ stir on SC verdict

In J&K High Court, ex-Bar chief alongwith GOI counsel argued strongly in favour of SARFAESI; incumbent Bar President opposed it

Ahmed Ali Fayyaz

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JAMMU, Dec 19: Notwithstanding a barrage of statements from both, the separatist as well as the mainstream opposition leaders in Kashmir valley against the Supreme Court of India verdict, Srinagar-based High Court Bar Association (HCBA) seems to be unlikely to take a stand on enforcement of the Central law giving powers to banks and other financial institutions to auction the mortgaged immovable properties of the defaulting borrowers in Jammu and Kashmir.

Even as some of its top functionaries, while responding to newspersons’ queries, have maintained what they argued as private counsels previously in J&K High Court, HCBA significantly had not issued any statement in support of the separatists’ diatribe till late on Monday.

Announced on December 16, the judgment of the Supreme Court judges Kurian Joseph and R.F. Nariman has stirred a hornets’ nest in Jammu and Kashmir as it has been resolutely hailed by the Jammu-based political parties, including BJP and National Panthers Party, but stoutly assailed by almost all the separatist and mainstream parties, including Omar Abdullah’s National Conference (NC).

While granting the financial institutions right to auction the mortgaged immovable properties of the permanent residents of Jammu and Kashmir in the event of their failure to pay back the loans, the Supreme Court has categorically set aside judgment of the Jammu and Kashmir High Court that had barred the banks from proceeding against the defaulters under the central law titled Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFAESI) in the State of Jammu and Kashmir.

The legal battle in JKHC had witnessed a drama of sorts including sudden resignation of the Mufti Mohammad Sayeed government’s Advocate General Riyaz Ahmad Jan in the thick of the arguments on June 25 — within 100 days of his appointment on March 15, 2015. Legal circles insist that Mr Jan —who asserted that the Mufti government had compromised dignity of the AG’s office, but never elaborated— wanted to oppose enforcement of the Sarfaesi Act but was “under pressure” from the PDP-BJP coalition to remain equivocal and borrow time.

The opposition politicians, as well as the independent writers, have invariably attached intrigue to the Mehbooba Mufti government’s “lackadaisical attitude” while pointing out that no eminent lawyer appeared in Supreme Court to defend the State’s exclusive right of legislation on matters of immovable property. The entire job was left to the State’s standing counsel. Even the Advocate General and the senior AAGs played truant.

On the other hand, Attorney General Mukul Rohtagi, joined by eminent lawyer Rakesh Dwivedi, appearing on behalf of State Bank of India and the Government of India, defended the different banks’ notices to the defaulters and enforcement of Sarfaesi Act in J&K. The judges decreed in their favour, asserting that J&K Sate had a special constitutional status but did not enjoy any “sovereignty” within the dominion of India.

“From High Court to Supreme Court, it was a discussion simply to determine whether it was the Parliament or the State Legislature that was by law and Constitution empowered to make laws related to this issue. High Court upheld that it was none other than the State Legislature. Supreme Court quashed that judgment and decreed that it was the Parliament”, former judge of JKHC Justice (retired) Hasnain Massodi explained.

HCBA apparently has its constraints in not taking a public stand as its top faces Mian Abdul Qayoom and Zaffar Ahmad Shah held divergent positions in JKHC. HCBA has been a constituent of the separatist conglomerate Hurriyat Conference and both, Mr Qayoom and Mr Shah, have been disputing J&K’s accession to India and struggling for Plebiscite under the UN resolutions.

While appearing on behalf of private petitioners, HCBA President and top notch lawyer Mian Qayoom, and senior advocate Altaf Haqani in JKHC opposed enforcement of Sarfaesi Act tooth and nail. They held that it was a matter of “administration of justice” in which the Executive or Legislature of the Government of India had no authority to legislate or make rules.

Mr Qayoom attracted the Bench’s attention 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, had not been followed. He argued that clause B (i) of Article 370 had restricted the power of the 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, were declared by the President to correspond to matters specified in the Instrument of Accession. He 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. He contended that this constitutional mechanism had not been followed for application of law to the State of J&K.

Mr Qayoom also referred to an application/ affidavit filed by the State of J&K in a writ petition in Jammu wing of the Court and submitted that the State of J&K had raised objections in respect of enforcement of the Act of 2002 in the State of J&K. He referred to section 140 of the Transfer of Property Act, 1882 (a State Act) to indicate that application of the Act of 2002 had directly impacted the fields of legislation, for which laws could be exclusively made by the State legislature.

On the contrary, former HCBA chief and the top advocate Zaffar Ahmad Shah, appearing on behalf of the Jammu and Kashmir Bank, argued strongly in favour of enforcement of the Sarfaesi Act in J&K, while claiming that the Parliament was within its right to make related laws for J&K State.

Zaffar Shah submitted that in view of Entry 45 of List-I, (Union List) of 7th Schedule of the Constitution of India, the Parliament was competent to legislate the Act of 2002. He emphasised that the Central Government had amended the Rules of 2002 and it had been prescribed that while enforcing the Act of 2002, the interests in the immovable property could 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 stood redressed.

Mr Shah, while referring to Article 370, submitted that in view of the 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 had been authorised 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, he argued, stood extended to the State of J&K in terms of the aforesaid constitutional order. He further submitted that it had been held by the Supreme Court, in case reported in (2009) 4 SCC 94 that the Act of 1993, as also Act of 2002, had been enacted in terms of Entry 45 of List-I, (Union List) of 7th Schedule of the Constitution of India.

Mr Shah argued that in view of the Authoritative Pronouncement of the Supreme Court, the issue that enactment falls within the purview of Entry 11 (a) of List-III, (Concurrent List) of 7th Schedule of the Constitution of India, had been “rendered irrelevant”. He asserted before the JKHC Bench that huge amounts of money had crystalized into Non Performing Assets. He submitted that withholding of huge amounts by the borrowers was “directly and adversely affecting the economic growth of the State of J&K”.

However, Mr Qayoom’s team won the case in JKHC. Even as Mr Shah did not appear in Supreme Court, his arguments in favour of the enforcement of Sarfaesi Act were further strengthened by Attorney General and other eminent lawyers engaged by the Centre to defeat a State that was in tacit collaboration with the Centre. Finally the verdict on December 16 came in favour of the Centre and the banks of which one respondent bank is controlled by Government of Jammu and Kashmir.

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