2017 (1) TMI 742 - SC - Indian Laws

Supreme Court Upholds Bank's Sale Notification Over State Land Laws

UCO BANK AND ANR. Versus DIPAK DEBBARMA & ORS.

UCO BANK AND ANR. Versus DIPAK DEBBARMA & ORS. - 2016 AIR 5502, 2016 (11) SCR 723, 2017 (2) SCC 585, 2016 (11) JT 251, 2016 (12) SCALE 301 Issues Involved:1. Whether 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 (Act of 2002) is in violation of Section 187 of the Tripura Land Revenue and Land Reforms Act, 1960 (Tripura Act of 1960).2. Whether Article 31-B of the Constitution provides immunity to the Tripura Act of 1960 from being overridden by the provisions of a Parliamentary statute.3. Whether the Act of 2002, which allows the sale of immovable properties offered as security for a loan without restriction on the class or category of buyers, prevails over the restrictive provision under Section 187 of the Tripura Act of 1960.4. Whether the sale Notification dated 26.06.2012 is invalid for infraction of Rule 5 and Rule 8(5) of the Security Interest (Enforcement) Rules, 2002.Issue-wise Detailed Analysis:1. Violation of Section 187 of the Tripura Act of 1960:The respondents, members of Scheduled Tribes in Tripura, contended that the Sale Notification dated 26.06.2012 issued by the appellant Bank violated Section 187 of the Tripura Act of 1960, which restricts the sale of mortgaged properties to non-tribal members. The High Court ruled in favor of the respondents, invalidating the Sale Notification based on this provision.2. Immunity under Article 31-B of the Constitution:The High Court's decision was based on the inclusion of the Tripura Act of 1960 in the Ninth Schedule of the Constitution, which purportedly provided it immunity under Article 31-B. However, the Supreme Court clarified that Article 31-B only provides immunity from challenges based on violations of Part III of the Constitution and does not prevent the Tripura Act from being overridden by a subsequent Parliamentary statute.3. Prevalence of the Act of 2002 over Section 187 of the Tripura Act of 1960:The core question addressed was whether the Act of 2002, which permits the sale of immovable properties without restrictions on buyer categories, prevails over the restrictive provisions of Section 187 of the Tripura Act. The Supreme Court emphasized that the Act of 2002, enacted by the Union Parliament and referable to Entry 45 of List I (Union List), is the dominant legislation concerning banking activities, including the sale of mortgaged properties. The Tripura Act, referable to Entries 18 and 45 of the State List, must give way to the Central Act in case of conflict. The Court reiterated the principle of federal supremacy under Article 246(1), which mandates that Parliamentary legislation prevails over State legislation in case of irreconcilable conflict.4. Compliance with Rule 5 and Rule 8(5) of the Security Interest (Enforcement) Rules, 2002:The High Court also invalidated the Sale Notification on the grounds of non-compliance with Rule 5 and Rule 8(5) of the Security Interest (Enforcement) Rules, 2002, which require obtaining a valuation report before the sale. The Supreme Court, however, found that the appellant Bank had complied with these requirements. A valuation report dated 14.06.2012 was obtained, and the property was sold at a price higher than the reserve price mentioned in the sale proclamation. Thus, the sale was not invalidated on this ground.Conclusion:The Supreme Court set aside the High Court's order, holding that the Act of 2002 prevails over the Tripura Act of 1960 in matters concerning the sale of mortgaged properties by banks. The Sale Notification dated 26.06.2012 was deemed valid, and the appeals were allowed without any order as to costs.