REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 11247 OF 2016
(arising out of S.L.P. (C) No.36973 of 2012)
UCO BANK AND ANR. APPELLANT(s)
VERSUS
DIPAK DEBBARMA & ORS. RESPONDENT(s)
WITH
CIVIL APPEAL NO.11250 OF 2016
(arising out of S.L.P. (C) No.33671 of 2016)
J U D G M E N T
RANJAN GOGOI, J.
Leave granted.
2. The writ petition out of which these appeals have arisen was
instituted before the Agartala Bench of the Gauhati High Court. The writ
petitioners, who are the respondents herein, are members of Scheduled
Tribe(s) of the State of Tripura. They had contended that the Sale
Notification dated 26.06.2012 issued by the appellant Bank under the
provisions of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (hereinafter referred to as the
“Act of 2002”) was in infraction of Section 187 of the Tripura Land Revenue
and Land Reforms Act, 1960 (hereinafter referred to as the “Tripura Act of
1960”) as under the Tripura Act there is a legislative embargo on the sale
of mortgaged properties by the bank to any person who is not a member of a
scheduled tribe. The auction purchasers in the present case happened to be
the persons who are not members of any scheduled tribe.
3. The High Court by the impugned order answered the writ petition in
favour of the respondents/writ petitioners on the ground that the Tripura
Act of 1960 being included in the Ninth Schedule to the Constitution and,
therefore, enjoying the protection of Section 31-B of the Constitution,
would prevail over the Act of 2002 so as to invalidate the sale
Notification dated 26.06.2012, the same being contrary to the provisions of
Section 187 of the Tripura Act of 1960.
4. It will not require much appreciation or scrutiny to come to the
conclusion that the High Court was wholly incorrect in answering the writ
petition and striking down the sale Notification dated 26.06.2012 on the
above basis. Article 31-B of the Constitution, on the very face of the
language contained therein, is self explanatory and provides
protection/immunity to a legislation from challenge on the ground that it
violates any of the provisions of Part III of the Constitution. Inclusion
of the Tripura Act of 1960 in the Ninth Schedule by itself, would,
therefore, not confer immunity to the said legislation from being
overridden by the provisions of a Parliamentary statute. This is a
question, therefore, that this Court will have to deal with notwithstanding
the fact that the proceedings before the High Court did not proceed on the
aforesaid basis. We had, therefore, permitted the learned counsels of both
sides to address us on the core question arising in the present appeals,
namely, whether the Act of 2002 insofar as it provides for sale of
immovable properties offered as security for a loan advanced, without any
restriction as to the class or category of buyers, would prevail
notwithstanding the restrictive provision in this regard under Section 187
of the Tripura Act of 1960.
5. Shri Mukul Rohatgi, the learned Attorney General for India appearing
on behalf of the appellant-Bank and Shri V. Giri, learned senior counsel
representing the auction-purchasers in the connected appeal have contended
that the purpose and object of the Act of 2002 is to regulate
securitisation and reconstruction of financial assets and enforcement of
security interest and for matters connected therewith. On the other hand,
the purpose of the Tripura Act of 1960 is to consolidate the law relating
to land revenue and to provide for the acquisition of estates and for
certain other measures of land reform. While the Act of 2002 enacted by the
Union Parliament is referable to Entry 45 of List I, the Tripura Act can be
traced to Entries 18 and 45 of the State List. Section 187 of the Tripura
Act puts an embargo on the sale of hypothecated/ mortgaged properties by a
bank to any person who is not a tribal. Therefore, the provisions of the
Tripura Act of 1960 deal with a crucial aspect of the subject of banking.
Reference in this regard is made to the provision of Section 13 of the Act
of 2002 which permits the secured creditor to enforce the security interest
without the intervention of the Court. The sale of the property of any
person, offered to a bank as security for any financial facility, so as to
recover the dues of the Bank is a part of the core banking activity of any
bank. The dominant legislation so far as banking is concerned, in the
present case, is the Act of 2002 enacted by the Union Parliament and not
the State Act. On the said basis, it is contended that by virtue of Article
246(1) of the Constitution, the Act of 2002, so far as sale of mortgaged
properties by the bank is concerned, would prevail over Section 187 of the
Tripura Act of 1960. The said provisions of the State Act must give way to
the provisions of the Central Act, it is urged.
6. Learned counsels for the respondents/writ petitioners, in reply, have
contended that the provisions of both the statutes can co-exist and run
parallelly without any conflict. It is urged that, in fact, there is no
conflict between the two. Section 187 of the Tripura Act of 1960 does not
prohibit or impose a complete embargo on the sale of mortgaged properties.
Only when the borrower is a tribal the sale by the Bank has also to be to a
tribal.
7. Repugnancy or inconsistency between the provisions of Central and
State enactments can occur in two situations. The first, in case of a
Central and a State Act on any field of entry mentioned in List III of the
Seventh Schedule (Concurrent List). To such a situation of repugnancy or
inconsistency, the provisions of Article 254 of the Constitution would
apply. If there is such an inconsistency, Article 254(1) makes it very
clear that the central law will prevail subject, however, to the provisions
of Article 254(2) and further subject to proviso to Article 254(2). The
above position would be clear from the opinion rendered by a three Judges
Bench of this Court in M/s Hoechst Pharmaceuticals Ltd. and Ors. vs.
State of Bihar and Ors.[1] Para 67 of the aforesaid opinion which may be
usefully noticed is in the following terms:
“67. Article 254 of the Constitution makes provision first, as to what
would happen in the case of conflict between a Central and State law with
regard to the subjects enumerated in the Concurrent List, and secondly, for
resolving such conflict. Article 254(1) enunciates the normal rule that in
the event of a conflict between a Union and a State law in the concurrent
field, the former prevails over the latter. Clause (1) lays down that if a
State law relating to a concurrent subject is ‘repugnant’ to a Union law
relating to that subject, then, whether the Union law is prior or later in
time, the Union law will prevail and the State law shall, to the extent of
such repugnancy, be void. To the general rule laid down in clause (1),
clause (2) engrafts an exception viz., that if the President assents to a
State law which has been reserved for his consideration, it will prevail
notwithstanding its repugnancy to an earlier law of the Union, both laws
dealing with a concurrent subject. In such a case, the Central Act, will
give way to the State Act only to the extent of inconsistency between the
two, and no more. In short, the result of obtaining the assent of the
President to a State Act which is inconsistent with a previous Union law
relating to a concurrent subject would be that the State Act will prevail
in that State and override the provisions of the Central Act in their
applicability to that State only. The predominance of the State law may
however be taken away if Parliament legislates under the proviso to clause
(2). The proviso to Article 254(2) empowers the Union Parliament to repeal
or amend a repugnant State law, either directly, or by itself enacting a
law repugnant to the State law with respect to the ‘same matter’. Even
though the subsequent law made by Parliament does not expressly repeal a
State law, even then, the State law will become void as soon as the
subsequent law of Parliament creating repugnancy is made. A State law would
be repugnant to the Union law when there is direct conflict between the two
laws. Such repugnancy may also arise where both laws operate in the same
field and the two cannot possibly stand together: See Zaverbhai Amaidas v.
State of Bombay, (1955) 1 SCR 799; M. Karunanidhi v. Union of India, (1979)
3 SCR 254 and T. Barai v. Henry Ah Hoe, (1983) 1 SCC 177.”
8. The above view has been reiterated in State of W.B. vs. Kesoram
Industries Ltd. and Ors.[2] There are several other pronouncements of this
Court on the aforesaid issue. The same, however, would not require any
mention as any such reference would be only a multiplication of discussions
on what appears to be a settled issue. In the present case, however, the
question before this Court is not one of repugnancy between a Central and a
State law relatable to an Entry in List III (Concurrent List). No further
attention to the above aspect of the matter would, therefore, be required.
9. The second situation of repugnancy or inconsistency as in the present
case is between to a subsequent Central law (Act of 2002) covered by Entry
45 of List I and an earlier State law (Tripura Act of 1960) relatable to
Entries 18 and 45 of List II. How such a situation is to be resolved and
answered and which legislation would have primacy is the moot question that
arises for consideration in the present appeals.
10. Article 246 of the Constitution of India is in the following terms.
“246. Subject-matter of laws made by Parliament and by the Legislatures of
States:-
(1) Notwithstanding anything in clauses (2) and (3), 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) Notwithstanding anything in clause (3), 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’)
(3) Subject to clauses (1) and (2), the Legislature of any State has
exclusive power to make laws for such State or any part thereof with
respect to any of the matters enumerated in List II in the Seventh Schedule
(in this Constitution referred to as the ‘State List’)
(4) Parliament has power to make laws with respect to any matter for any
part of the territory of India not included (in a State) notwithstanding
that such matter is a matter enumerated in the State List”
11. In interpreting Article 246 regard must be had to the constitutional
scheme which visualises a federal structure giving full autonomy to the
Union Parliament as well as to the State legislatures in their
respective/demarcated fields of legislation. The problem may, however,
become a little more complex than what may seemingly appear as the two
legislations may very well be within the respective domains of the
concerned legislatures and, yet, there may be intrusion into areas that
fall beyond the assigned fields of legislation. In such a situation it will
be plain duty of the Constitutional Court to see if the conflict can be
resolved by acknowledging the mutual existence of the two legislations. If
that is not possible, then by virtue of the provisions of Article 246(1),
the Parliamentary legislation would prevail and the
State legislation will have to give way notwithstanding the fact that the
State legislation is within the demarcated field (List II). This is the
principle of federal supremacy which Article 246 of the Constitution
embodies. The said principle will, however, prevail provided the pre-
condition exists, namely, the Parliamentary legislation is the dominant
legislation and the State legislation, though within its own field, has the
effect of encroaching on a vital sphere of the subject or entry to which
the dominant legislation is referable. This is the principle that is
discernible from the Constitution Bench judgment of this Court in State of
West Bengal and Ors. vs. Committee for Protection of Democratic Rights,
West Bengal and Ors.[3] Paragraphs 25, 26 and 27 which illuminates the
issue may be conveniently extracted below.
“25. The non obstante clause in Article 246(1) contemplates the
predominance or supremacy of the Union Legislature. This power is not
encumbered by anything contained in clauses (2) and (3) for these clauses
themselves are expressly limited and made subject to the non obstante
clause in Article 246(1). The State Legislature has exclusive power to make
laws for such State or any part thereof with respect to any of the matters
enumerated in List II in the Seventh Schedule and it also has the power to
make laws with respect to any matters enumerated in List III (Concurrent
List). The exclusive power of the State Legislature to legislate with
respect to any of the matters enumerated in List II has to be exercised
subject to clause (1) i.e. the exclusive power of Parliament to legislate
with respect to matters enumerated in List I. As a consequence, if there is
a conflict between an entry in List I and an entry in List II, which is not
capable of reconciliation, the power of Parliament to legislate with
respect to a matter enumerated in List II must supersede pro tanto the
exercise of power of the State Legislature.
26. Both Parliament and the State Legislature have concurrent powers of
legislation with respect to any of the matters enumerated in List III. The
words “notwithstanding anything contained in clauses (2) and (3)” in
Article 246(1) and the words “subject to clauses (1) and (2)” in Article
246(3) lay down the principle of federal supremacy viz. that in case of
inevitable conflict between the Union and State powers, the Union power as
enumerated in List I shall prevail over the State power as enumerated in
Lists II and III and in case of an overlapping between Lists II and III,
the latter shall prevail.
27. Though, undoubtedly, the Constitution exhibits supremacy of Parliament
over the State Legislatures, yet the principle of federal supremacy laid
down in Article 246 of the Constitution cannot be resorted to unless there
is an irreconcilable direct conflict between the entries in the Union and
the State Lists. Thus, there is no quarrel with the broad proposition that
under the Constitution there is a clear demarcation of legislative powers
between the Union and the States and they have to confine themselves within
the field entrusted to them. It may also be borne in mind that the function
of the lists is not to confer powers; they merely demarcate the legislative
field……………………”
12. Equally illuminating is the view available in the opinion of this
Court rendered in re. Special Reference No. 1 of 2001[4], which is
reproduced below.
“13. The Constitution of India delineates the contours of the powers
enjoyed by the State Legislature and Parliament in respect of various
subjects enumerated in the Seventh Schedule. The rules relating to
distribution of powers are to be gathered from the various provisions
contained in Part XI and the legislative heads mentioned in the three lists
of the Schedule. The legislative powers of both the Union and State
Legislatures are given in precise terms. Entries in the lists are
themselves not powers of legislation, but fields of legislation. However,
an entry in one list cannot be so interpreted as to make it cancel or
obliterate another entry or make another entry meaningless. In case of
apparent conflict, it is the duty of the court to iron out the crease and
avoid conflict by reconciling the conflict. If any entry overlaps or is in
apparent conflict with another entry, every attempt shall be made to
harmonise the same.
14. When the question arose about reconciling Entry 45 of List I, duties of
excise, and Entry 18 of List II, taxes on the sale of goods, of the
Government of India Act, 1935, Sir Maurice Gwyer, C.J. in Central Provinces
and Berar Act No. XIV of 1938, In re, (1939) FCR 18, at pp. 42-44 observed:
“A grant of the power in general terms, standing by itself, would no doubt
be construed in the wider sense, but it may be qualified by other express
provisions in the same enactment, by the implications of the context, and
even by considerations arising out of what appears to be the general scheme
of the Act.”
It was further observed:
“An endeavour must be made to solve it, as the Judicial Committee have
said, by having recourse to the context and scheme of the Act, and a
reconciliation attempted between two apparently conflicting jurisdictions
by reading the two entries together and by interpreting, and, where
necessary modifying the language of the one by that of the other. If indeed
such a reconciliation should prove impossible, then, and only then, will
the non obstante clause operate and the federal power prevail;”
15. Although Parliament cannot legislate on any of the entries in the State
List, it may do so incidentally while essentially dealing with the subject
coming within the purview of the entry in the Union List. Conversely, the
State Legislature also while making legislation may incidentally trench
upon the subject covered in the Union List. Such incidental encroachment in
either event need not make the legislation ultra vires the Constitution.
The doctrine of pith and substance is sometimes invoked to find out the
nature and content of the legislation. However, when there is an
irreconcilable conflict between the two legislations, the Central
legislation shall prevail. However, every attempt would be made to
reconcile the conflict.”
13. The federal structure under the constitutional scheme can also work
to nullify an incidental encroachment made by the Parliamentary legislation
on a subject of a State legislation where the dominant legislation is the
State legislation. An attempt to keep the aforesaid constitutional balance
intact and give a limited operation to the doctrine of federal supremacy
can be discerned in the concurring judgment of Ruma Pal, J. in ITC Ltd.
vs. Agricultural Produce Market Committee and Ors.[5], wherein after
quoting the observations of this Court in the case of S.R. Bomai vs. Union
of India [6] (para 276), the learned Judge has gone to observe as follows
(para 94 of the report):
“276. The fact that under the scheme of our Constitution, greater power is
conferred upon the Centre vis-à-vis the States does not mean that States
are mere appendages of the Centre. Within the sphere allotted to them,
States are supreme. The Centre cannot tamper with their powers. More
particularly, the courts should not adopt an approach, an interpretation,
which has the effect of or tends to have the effect of whittling down the
powers reserved to the States.
94. Although Parliament cannot legislate on any of the entries in the State
List, it may do so incidentally while essentially legislating within the
entries under the Union List. Conversely, the State Legislatures may
encroach on the Union List, when such an encroachment is merely ancillary
to an exercise of power intrinsically under the State List. The fact of
encroachment does not affect the vires of the law even as regards the area
of encroachment. [A.S. Krishna vs. State of Madras, AIR 1957 SC 297;
Chaturbhai M. Patel vs. Union of India, (1960) 2 SCR 362; State of
Rajasthan vs. G. Chawla, AIR 1959 SC 544; Ishwari Khetan Sugar Mills (P)
Ltd. vs. State of U.P., (1980) 4 SCC 136]. This principle commonly known as
the doctrine of pith and substance, does not amount to an extension of the
legislative fields. Therefore, such incidental encroachment in either event
does not deprive the State Legislature in the first case or Parliament in
the second, of their exclusive powers under the entry so encroached upon.
In the event the incidental encroachment conflicts with legislation
actually enacted by the dominant power, the dominant legislation will
prevail.”
14. The aforesaid view in the concurring judgment of Ruma Pal, J. in ITC
Ltd. vs. Agricultural Produce Market Committee and Ors. (supra), seems to
have been echoed in a recent pronouncement of this Court in Vishal N.
Kalsaria vs. Bank of India & Ors.[7] , wherein this Court had held that
the provisions of the Act of 2002 will not have an overriding effect on the
provisions of the State Rent Control Acts.
15. In the present case the conflict between the Central and the State
Act is on account of an apparent overstepping by the provisions of the
State Act dealing with land reform into an area of banking covered by the
Central Act. The test, therefore, would be to find out as to which is the
dominant legislation having regard the area of encroachment.
16. The provisions of the Act of 2002 enable the bank to take possession
of any property where a security interest has been created in its favour.
Specifically, Section 13 of the 2002 Act enables the bank to take
possession of and sell such property to any person to realise its dues. The
purchaser of such property acquires a clear title to the property sold,
subject to compliance with the requirements prescribed.
17. Section 187 of the Tripura Act of 1960, on the other hand, prohibits
the bank from transferring the property which has been mortgaged by a
member of a scheduled tribe to any person other than a member of a
scheduled tribe. This is a clear restriction on what is permitted by the
Act of 2002 for the realisation of amounts due to the bank.
18. The Act of 2002 is relatable to the Entry of banking which is
included in List I of the Seventh 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.
19. The decision of this Court in Central Bank of India vs. State of
Kerala and Ors.[8], holding that the provisions of the Bombay Sales Tax
Act, 1959 and the Kerala General Sales Tax Act, 1963 providing for a first
charge on the property of the person liable to pay sales tax, in favour of
the State, is not inconsistent with the provisions contained in the
Recovery of Debts Due to Banks and Financial Institutions, Act 1993 (for
short the “DRT Act”) and also the Act of 2002 must be understood by
noticing the absence of any specific provision in either of the Central
enactments containing a similar/parallel provision of a first charge in
favour of the bank. The judgment of this Court holding the State enactments
to be valid and the Central enactments not to have any overriding effect,
proceeds on the said basis i.e. absence of any provision creating a first
charge in favour of the bank in either of the Central enactments.
20. The High Court in the judgment under challenge has also taken the
view that the impugned sale Notification dated 26.06.2012 is invalid for
infraction of Rule 5 and Rule 8(5) of the Security Interest (Enforcement)
Rules, 2002, in as much as the bank did not obtain any valuation report of
the property before resorting to the impugned auction sale. The Rules in
question read as follows.
“5. Valuation of movable secured assets.-
After taking possession under sub-rule (1) of rule 4 and in any case before
sale, the authorised officer shall obtain the estimated value of the
movable secured assets and thereafter, if considered necessary, fix in
consultation with the secured creditor, the reserve price of the assets to
be sold in realisation of the dues of the secured creditor.”
“8. Sale of immovable secured assets.-
(5) Before effecting sale of the immovable property referred to in sub-rule
(1) of rule 9, the authorised officer shall obtain valuation of the
property from an approved valuer and in consultation with the secured
creditor, fix the reserve price of the property and may sell the whole or
any part of such immovable secured asset by any of the following methods:
21. Our attention had been specifically drawn to the stand of the
appellant-Bank before the High Court in the counter filed (paragraph 20).
Taking into account the averments made in the said affidavit, we find that
the sale proclamation had mentioned a reserve price of Rs. 275 lacs and the
property had been actually sold by auction at Rs. 416 lacs. That apart, the
valuation report dated 14.06.2012 of the approved valuer valuing the
property at Rs. 341.15 lacs has also been placed before us by way of an
additional document which we are inclined to take on record. The
requirements under Rule 5 and Rule 8(5) have, therefore, been complied with
and the sale proclamation and the sale effected pursuant thereto cannot be
invalidated on the above ground.
22. For the aforesaid reasons, the impugned order passed by the High
Court has to be set aside which we hereby do. The appeals are consequently
allowed. There will, however, be no order as to costs.
……………….....................,J.
(RANJAN GOGOI)
……………….....................,J.
(ABHAY MANOHAR SAPRE)
NEW DELHI
NOVEMBER 25, 2016.
-----------------------
[1] (1983) 4 SCC 45
[2] (2004) 10 SCC 201
[3] (2010) 3 SCC 571
[4] (2004) 4 SCC 489
[5] (2002) 9 SCC 232
[6] (1994) 3 SCC 1
[7] (2016) 3 SCC 762
[8] (2009) 4 SCC 94
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 11247 OF 2016
(arising out of S.L.P. (C) No.36973 of 2012)
UCO BANK AND ANR. APPELLANT(s)
VERSUS
DIPAK DEBBARMA & ORS. RESPONDENT(s)
WITH
CIVIL APPEAL NO.11250 OF 2016
(arising out of S.L.P. (C) No.33671 of 2016)
J U D G M E N T
RANJAN GOGOI, J.
Leave granted.
2. The writ petition out of which these appeals have arisen was
instituted before the Agartala Bench of the Gauhati High Court. The writ
petitioners, who are the respondents herein, are members of Scheduled
Tribe(s) of the State of Tripura. They had contended that the Sale
Notification dated 26.06.2012 issued by the appellant Bank under the
provisions of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (hereinafter referred to as the
“Act of 2002”) was in infraction of Section 187 of the Tripura Land Revenue
and Land Reforms Act, 1960 (hereinafter referred to as the “Tripura Act of
1960”) as under the Tripura Act there is a legislative embargo on the sale
of mortgaged properties by the bank to any person who is not a member of a
scheduled tribe. The auction purchasers in the present case happened to be
the persons who are not members of any scheduled tribe.
3. The High Court by the impugned order answered the writ petition in
favour of the respondents/writ petitioners on the ground that the Tripura
Act of 1960 being included in the Ninth Schedule to the Constitution and,
therefore, enjoying the protection of Section 31-B of the Constitution,
would prevail over the Act of 2002 so as to invalidate the sale
Notification dated 26.06.2012, the same being contrary to the provisions of
Section 187 of the Tripura Act of 1960.
4. It will not require much appreciation or scrutiny to come to the
conclusion that the High Court was wholly incorrect in answering the writ
petition and striking down the sale Notification dated 26.06.2012 on the
above basis. Article 31-B of the Constitution, on the very face of the
language contained therein, is self explanatory and provides
protection/immunity to a legislation from challenge on the ground that it
violates any of the provisions of Part III of the Constitution. Inclusion
of the Tripura Act of 1960 in the Ninth Schedule by itself, would,
therefore, not confer immunity to the said legislation from being
overridden by the provisions of a Parliamentary statute. This is a
question, therefore, that this Court will have to deal with notwithstanding
the fact that the proceedings before the High Court did not proceed on the
aforesaid basis. We had, therefore, permitted the learned counsels of both
sides to address us on the core question arising in the present appeals,
namely, whether the Act of 2002 insofar as it provides for sale of
immovable properties offered as security for a loan advanced, without any
restriction as to the class or category of buyers, would prevail
notwithstanding the restrictive provision in this regard under Section 187
of the Tripura Act of 1960.
5. Shri Mukul Rohatgi, the learned Attorney General for India appearing
on behalf of the appellant-Bank and Shri V. Giri, learned senior counsel
representing the auction-purchasers in the connected appeal have contended
that the purpose and object of the Act of 2002 is to regulate
securitisation and reconstruction of financial assets and enforcement of
security interest and for matters connected therewith. On the other hand,
the purpose of the Tripura Act of 1960 is to consolidate the law relating
to land revenue and to provide for the acquisition of estates and for
certain other measures of land reform. While the Act of 2002 enacted by the
Union Parliament is referable to Entry 45 of List I, the Tripura Act can be
traced to Entries 18 and 45 of the State List. Section 187 of the Tripura
Act puts an embargo on the sale of hypothecated/ mortgaged properties by a
bank to any person who is not a tribal. Therefore, the provisions of the
Tripura Act of 1960 deal with a crucial aspect of the subject of banking.
Reference in this regard is made to the provision of Section 13 of the Act
of 2002 which permits the secured creditor to enforce the security interest
without the intervention of the Court. The sale of the property of any
person, offered to a bank as security for any financial facility, so as to
recover the dues of the Bank is a part of the core banking activity of any
bank. The dominant legislation so far as banking is concerned, in the
present case, is the Act of 2002 enacted by the Union Parliament and not
the State Act. On the said basis, it is contended that by virtue of Article
246(1) of the Constitution, the Act of 2002, so far as sale of mortgaged
properties by the bank is concerned, would prevail over Section 187 of the
Tripura Act of 1960. The said provisions of the State Act must give way to
the provisions of the Central Act, it is urged.
6. Learned counsels for the respondents/writ petitioners, in reply, have
contended that the provisions of both the statutes can co-exist and run
parallelly without any conflict. It is urged that, in fact, there is no
conflict between the two. Section 187 of the Tripura Act of 1960 does not
prohibit or impose a complete embargo on the sale of mortgaged properties.
Only when the borrower is a tribal the sale by the Bank has also to be to a
tribal.
7. Repugnancy or inconsistency between the provisions of Central and
State enactments can occur in two situations. The first, in case of a
Central and a State Act on any field of entry mentioned in List III of the
Seventh Schedule (Concurrent List). To such a situation of repugnancy or
inconsistency, the provisions of Article 254 of the Constitution would
apply. If there is such an inconsistency, Article 254(1) makes it very
clear that the central law will prevail subject, however, to the provisions
of Article 254(2) and further subject to proviso to Article 254(2). The
above position would be clear from the opinion rendered by a three Judges
Bench of this Court in M/s Hoechst Pharmaceuticals Ltd. and Ors. vs.
State of Bihar and Ors.[1] Para 67 of the aforesaid opinion which may be
usefully noticed is in the following terms:
“67. Article 254 of the Constitution makes provision first, as to what
would happen in the case of conflict between a Central and State law with
regard to the subjects enumerated in the Concurrent List, and secondly, for
resolving such conflict. Article 254(1) enunciates the normal rule that in
the event of a conflict between a Union and a State law in the concurrent
field, the former prevails over the latter. Clause (1) lays down that if a
State law relating to a concurrent subject is ‘repugnant’ to a Union law
relating to that subject, then, whether the Union law is prior or later in
time, the Union law will prevail and the State law shall, to the extent of
such repugnancy, be void. To the general rule laid down in clause (1),
clause (2) engrafts an exception viz., that if the President assents to a
State law which has been reserved for his consideration, it will prevail
notwithstanding its repugnancy to an earlier law of the Union, both laws
dealing with a concurrent subject. In such a case, the Central Act, will
give way to the State Act only to the extent of inconsistency between the
two, and no more. In short, the result of obtaining the assent of the
President to a State Act which is inconsistent with a previous Union law
relating to a concurrent subject would be that the State Act will prevail
in that State and override the provisions of the Central Act in their
applicability to that State only. The predominance of the State law may
however be taken away if Parliament legislates under the proviso to clause
(2). The proviso to Article 254(2) empowers the Union Parliament to repeal
or amend a repugnant State law, either directly, or by itself enacting a
law repugnant to the State law with respect to the ‘same matter’. Even
though the subsequent law made by Parliament does not expressly repeal a
State law, even then, the State law will become void as soon as the
subsequent law of Parliament creating repugnancy is made. A State law would
be repugnant to the Union law when there is direct conflict between the two
laws. Such repugnancy may also arise where both laws operate in the same
field and the two cannot possibly stand together: See Zaverbhai Amaidas v.
State of Bombay, (1955) 1 SCR 799; M. Karunanidhi v. Union of India, (1979)
3 SCR 254 and T. Barai v. Henry Ah Hoe, (1983) 1 SCC 177.”
8. The above view has been reiterated in State of W.B. vs. Kesoram
Industries Ltd. and Ors.[2] There are several other pronouncements of this
Court on the aforesaid issue. The same, however, would not require any
mention as any such reference would be only a multiplication of discussions
on what appears to be a settled issue. In the present case, however, the
question before this Court is not one of repugnancy between a Central and a
State law relatable to an Entry in List III (Concurrent List). No further
attention to the above aspect of the matter would, therefore, be required.
9. The second situation of repugnancy or inconsistency as in the present
case is between to a subsequent Central law (Act of 2002) covered by Entry
45 of List I and an earlier State law (Tripura Act of 1960) relatable to
Entries 18 and 45 of List II. How such a situation is to be resolved and
answered and which legislation would have primacy is the moot question that
arises for consideration in the present appeals.
10. Article 246 of the Constitution of India is in the following terms.
“246. Subject-matter of laws made by Parliament and by the Legislatures of
States:-
(1) Notwithstanding anything in clauses (2) and (3), 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) Notwithstanding anything in clause (3), 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’)
(3) Subject to clauses (1) and (2), the Legislature of any State has
exclusive power to make laws for such State or any part thereof with
respect to any of the matters enumerated in List II in the Seventh Schedule
(in this Constitution referred to as the ‘State List’)
(4) Parliament has power to make laws with respect to any matter for any
part of the territory of India not included (in a State) notwithstanding
that such matter is a matter enumerated in the State List”
11. In interpreting Article 246 regard must be had to the constitutional
scheme which visualises a federal structure giving full autonomy to the
Union Parliament as well as to the State legislatures in their
respective/demarcated fields of legislation. The problem may, however,
become a little more complex than what may seemingly appear as the two
legislations may very well be within the respective domains of the
concerned legislatures and, yet, there may be intrusion into areas that
fall beyond the assigned fields of legislation. In such a situation it will
be plain duty of the Constitutional Court to see if the conflict can be
resolved by acknowledging the mutual existence of the two legislations. If
that is not possible, then by virtue of the provisions of Article 246(1),
the Parliamentary legislation would prevail and the
State legislation will have to give way notwithstanding the fact that the
State legislation is within the demarcated field (List II). This is the
principle of federal supremacy which Article 246 of the Constitution
embodies. The said principle will, however, prevail provided the pre-
condition exists, namely, the Parliamentary legislation is the dominant
legislation and the State legislation, though within its own field, has the
effect of encroaching on a vital sphere of the subject or entry to which
the dominant legislation is referable. This is the principle that is
discernible from the Constitution Bench judgment of this Court in State of
West Bengal and Ors. vs. Committee for Protection of Democratic Rights,
West Bengal and Ors.[3] Paragraphs 25, 26 and 27 which illuminates the
issue may be conveniently extracted below.
“25. The non obstante clause in Article 246(1) contemplates the
predominance or supremacy of the Union Legislature. This power is not
encumbered by anything contained in clauses (2) and (3) for these clauses
themselves are expressly limited and made subject to the non obstante
clause in Article 246(1). The State Legislature has exclusive power to make
laws for such State or any part thereof with respect to any of the matters
enumerated in List II in the Seventh Schedule and it also has the power to
make laws with respect to any matters enumerated in List III (Concurrent
List). The exclusive power of the State Legislature to legislate with
respect to any of the matters enumerated in List II has to be exercised
subject to clause (1) i.e. the exclusive power of Parliament to legislate
with respect to matters enumerated in List I. As a consequence, if there is
a conflict between an entry in List I and an entry in List II, which is not
capable of reconciliation, the power of Parliament to legislate with
respect to a matter enumerated in List II must supersede pro tanto the
exercise of power of the State Legislature.
26. Both Parliament and the State Legislature have concurrent powers of
legislation with respect to any of the matters enumerated in List III. The
words “notwithstanding anything contained in clauses (2) and (3)” in
Article 246(1) and the words “subject to clauses (1) and (2)” in Article
246(3) lay down the principle of federal supremacy viz. that in case of
inevitable conflict between the Union and State powers, the Union power as
enumerated in List I shall prevail over the State power as enumerated in
Lists II and III and in case of an overlapping between Lists II and III,
the latter shall prevail.
27. Though, undoubtedly, the Constitution exhibits supremacy of Parliament
over the State Legislatures, yet the principle of federal supremacy laid
down in Article 246 of the Constitution cannot be resorted to unless there
is an irreconcilable direct conflict between the entries in the Union and
the State Lists. Thus, there is no quarrel with the broad proposition that
under the Constitution there is a clear demarcation of legislative powers
between the Union and the States and they have to confine themselves within
the field entrusted to them. It may also be borne in mind that the function
of the lists is not to confer powers; they merely demarcate the legislative
field……………………”
12. Equally illuminating is the view available in the opinion of this
Court rendered in re. Special Reference No. 1 of 2001[4], which is
reproduced below.
“13. The Constitution of India delineates the contours of the powers
enjoyed by the State Legislature and Parliament in respect of various
subjects enumerated in the Seventh Schedule. The rules relating to
distribution of powers are to be gathered from the various provisions
contained in Part XI and the legislative heads mentioned in the three lists
of the Schedule. The legislative powers of both the Union and State
Legislatures are given in precise terms. Entries in the lists are
themselves not powers of legislation, but fields of legislation. However,
an entry in one list cannot be so interpreted as to make it cancel or
obliterate another entry or make another entry meaningless. In case of
apparent conflict, it is the duty of the court to iron out the crease and
avoid conflict by reconciling the conflict. If any entry overlaps or is in
apparent conflict with another entry, every attempt shall be made to
harmonise the same.
14. When the question arose about reconciling Entry 45 of List I, duties of
excise, and Entry 18 of List II, taxes on the sale of goods, of the
Government of India Act, 1935, Sir Maurice Gwyer, C.J. in Central Provinces
and Berar Act No. XIV of 1938, In re, (1939) FCR 18, at pp. 42-44 observed:
“A grant of the power in general terms, standing by itself, would no doubt
be construed in the wider sense, but it may be qualified by other express
provisions in the same enactment, by the implications of the context, and
even by considerations arising out of what appears to be the general scheme
of the Act.”
It was further observed:
“An endeavour must be made to solve it, as the Judicial Committee have
said, by having recourse to the context and scheme of the Act, and a
reconciliation attempted between two apparently conflicting jurisdictions
by reading the two entries together and by interpreting, and, where
necessary modifying the language of the one by that of the other. If indeed
such a reconciliation should prove impossible, then, and only then, will
the non obstante clause operate and the federal power prevail;”
15. Although Parliament cannot legislate on any of the entries in the State
List, it may do so incidentally while essentially dealing with the subject
coming within the purview of the entry in the Union List. Conversely, the
State Legislature also while making legislation may incidentally trench
upon the subject covered in the Union List. Such incidental encroachment in
either event need not make the legislation ultra vires the Constitution.
The doctrine of pith and substance is sometimes invoked to find out the
nature and content of the legislation. However, when there is an
irreconcilable conflict between the two legislations, the Central
legislation shall prevail. However, every attempt would be made to
reconcile the conflict.”
13. The federal structure under the constitutional scheme can also work
to nullify an incidental encroachment made by the Parliamentary legislation
on a subject of a State legislation where the dominant legislation is the
State legislation. An attempt to keep the aforesaid constitutional balance
intact and give a limited operation to the doctrine of federal supremacy
can be discerned in the concurring judgment of Ruma Pal, J. in ITC Ltd.
vs. Agricultural Produce Market Committee and Ors.[5], wherein after
quoting the observations of this Court in the case of S.R. Bomai vs. Union
of India [6] (para 276), the learned Judge has gone to observe as follows
(para 94 of the report):
“276. The fact that under the scheme of our Constitution, greater power is
conferred upon the Centre vis-à-vis the States does not mean that States
are mere appendages of the Centre. Within the sphere allotted to them,
States are supreme. The Centre cannot tamper with their powers. More
particularly, the courts should not adopt an approach, an interpretation,
which has the effect of or tends to have the effect of whittling down the
powers reserved to the States.
94. Although Parliament cannot legislate on any of the entries in the State
List, it may do so incidentally while essentially legislating within the
entries under the Union List. Conversely, the State Legislatures may
encroach on the Union List, when such an encroachment is merely ancillary
to an exercise of power intrinsically under the State List. The fact of
encroachment does not affect the vires of the law even as regards the area
of encroachment. [A.S. Krishna vs. State of Madras, AIR 1957 SC 297;
Chaturbhai M. Patel vs. Union of India, (1960) 2 SCR 362; State of
Rajasthan vs. G. Chawla, AIR 1959 SC 544; Ishwari Khetan Sugar Mills (P)
Ltd. vs. State of U.P., (1980) 4 SCC 136]. This principle commonly known as
the doctrine of pith and substance, does not amount to an extension of the
legislative fields. Therefore, such incidental encroachment in either event
does not deprive the State Legislature in the first case or Parliament in
the second, of their exclusive powers under the entry so encroached upon.
In the event the incidental encroachment conflicts with legislation
actually enacted by the dominant power, the dominant legislation will
prevail.”
14. The aforesaid view in the concurring judgment of Ruma Pal, J. in ITC
Ltd. vs. Agricultural Produce Market Committee and Ors. (supra), seems to
have been echoed in a recent pronouncement of this Court in Vishal N.
Kalsaria vs. Bank of India & Ors.[7] , wherein this Court had held that
the provisions of the Act of 2002 will not have an overriding effect on the
provisions of the State Rent Control Acts.
15. In the present case the conflict between the Central and the State
Act is on account of an apparent overstepping by the provisions of the
State Act dealing with land reform into an area of banking covered by the
Central Act. The test, therefore, would be to find out as to which is the
dominant legislation having regard the area of encroachment.
16. The provisions of the Act of 2002 enable the bank to take possession
of any property where a security interest has been created in its favour.
Specifically, Section 13 of the 2002 Act enables the bank to take
possession of and sell such property to any person to realise its dues. The
purchaser of such property acquires a clear title to the property sold,
subject to compliance with the requirements prescribed.
17. Section 187 of the Tripura Act of 1960, on the other hand, prohibits
the bank from transferring the property which has been mortgaged by a
member of a scheduled tribe to any person other than a member of a
scheduled tribe. This is a clear restriction on what is permitted by the
Act of 2002 for the realisation of amounts due to the bank.
18. The Act of 2002 is relatable to the Entry of banking which is
included in List I of the Seventh 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.
19. The decision of this Court in Central Bank of India vs. State of
Kerala and Ors.[8], holding that the provisions of the Bombay Sales Tax
Act, 1959 and the Kerala General Sales Tax Act, 1963 providing for a first
charge on the property of the person liable to pay sales tax, in favour of
the State, is not inconsistent with the provisions contained in the
Recovery of Debts Due to Banks and Financial Institutions, Act 1993 (for
short the “DRT Act”) and also the Act of 2002 must be understood by
noticing the absence of any specific provision in either of the Central
enactments containing a similar/parallel provision of a first charge in
favour of the bank. The judgment of this Court holding the State enactments
to be valid and the Central enactments not to have any overriding effect,
proceeds on the said basis i.e. absence of any provision creating a first
charge in favour of the bank in either of the Central enactments.
20. The High Court in the judgment under challenge has also taken the
view that the impugned sale Notification dated 26.06.2012 is invalid for
infraction of Rule 5 and Rule 8(5) of the Security Interest (Enforcement)
Rules, 2002, in as much as the bank did not obtain any valuation report of
the property before resorting to the impugned auction sale. The Rules in
question read as follows.
“5. Valuation of movable secured assets.-
After taking possession under sub-rule (1) of rule 4 and in any case before
sale, the authorised officer shall obtain the estimated value of the
movable secured assets and thereafter, if considered necessary, fix in
consultation with the secured creditor, the reserve price of the assets to
be sold in realisation of the dues of the secured creditor.”
“8. Sale of immovable secured assets.-
(5) Before effecting sale of the immovable property referred to in sub-rule
(1) of rule 9, the authorised officer shall obtain valuation of the
property from an approved valuer and in consultation with the secured
creditor, fix the reserve price of the property and may sell the whole or
any part of such immovable secured asset by any of the following methods:
21. Our attention had been specifically drawn to the stand of the
appellant-Bank before the High Court in the counter filed (paragraph 20).
Taking into account the averments made in the said affidavit, we find that
the sale proclamation had mentioned a reserve price of Rs. 275 lacs and the
property had been actually sold by auction at Rs. 416 lacs. That apart, the
valuation report dated 14.06.2012 of the approved valuer valuing the
property at Rs. 341.15 lacs has also been placed before us by way of an
additional document which we are inclined to take on record. The
requirements under Rule 5 and Rule 8(5) have, therefore, been complied with
and the sale proclamation and the sale effected pursuant thereto cannot be
invalidated on the above ground.
22. For the aforesaid reasons, the impugned order passed by the High
Court has to be set aside which we hereby do. The appeals are consequently
allowed. There will, however, be no order as to costs.
……………….....................,J.
(RANJAN GOGOI)
……………….....................,J.
(ABHAY MANOHAR SAPRE)
NEW DELHI
NOVEMBER 25, 2016.
-----------------------
[1] (1983) 4 SCC 45
[2] (2004) 10 SCC 201
[3] (2010) 3 SCC 571
[4] (2004) 4 SCC 489
[5] (2002) 9 SCC 232
[6] (1994) 3 SCC 1
[7] (2016) 3 SCC 762
[8] (2009) 4 SCC 94
