Jammu and Kashmir Constitution is Subordinate to Constitution of India

>>> On December 16, 2016: Supreme Court of India;

It is 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

They (residents of state) are governed first by the Constitution of India and also by the Constitution of Jammu & Kashmir, the bench said, referring to the preamble of the Constitution of J&K, 1957.

Underlining that the quasi-federal structure of the Constitution of India continues even with respect to J&K, the bench said:

“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.”

It said the J&K Constitution has been made to further define the existing relationship of the state with the Union of India as an integral part thereof.

>>> J&K residents are “first and foremost” Indian citizens.

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 are first and foremost citizens of India permanent residents of the state of J&K 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.

>>> The bench called it “disturbing” that various parts of a judgment in appeal by the J&K High Court spoke of the absolute sovereign power of the state. “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,” the judges said.

>>> THE CONSTITUTION OF JAMMU AND KASHMIR:

Preamble:-

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

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;

PART II

THE STATE

3. Relationship of the State with the Union of India:-

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.

THE JAMMU AND KASHMIR REPRESENTATION OF THE PEOPLE ACT, 1957 [Act No. IV of 1957] [As amended by Act IX of 2014]

Be it enacted by the Jammu and Kashmir State Legislature in the Eighth Year of the Republic of India as follows:-

2. Definitions:

(b) "Constitution" means the Constitution of Jammu and Kashmir;

1 [(e) "Election Commission" means the Election Commission appointed by the President under Article 324 of the Constitution of India];

>>> THE CONSTITUTION OF INDIA

ARTICLE 1. Name and territory of the Union

THE UNION AND ITS TERRITORY 1.

1.India, that is Bharat, shall be a Union of States.

1[(2) The States and the territories thereof shall be as specified in the First Schedule.]

(3) The territory of India shall comprise—

(a) the territories of the States;

2[(b) the Union territories specified in the First Schedule; and]

(c) such other territories as may be acquired.

370. (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—

>>> 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

Section 17. Right to appeal.

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.

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 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.

Appeals from the High Court of Jammu & Kashmir lie to the Supreme Court of India

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

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.

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.

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.

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.

18. 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.

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.

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.

23. Given this legislative scenario, we have now to examine SARFAESI in its applicability to the State of Jammu & Kashmir.

32. Applying the doctrine of pith and substance to SARFAESI, it is clear 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.

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.

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”.

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.

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.

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 ourselvesJUSTICE, 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 55 Page 56 (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…………………………. 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-

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.

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

………………………….J. 
(Kurian Joseph) 

…………………………. J. 
(R.F. Nariman)

New Delhi;
December 16, 2016.