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Supreme Court recently gave a judgement over applicability of SARFAESI Act in Jammu and Kashmir and Hurriyat is planning to start a protest over this. Well, may be, it won’t because of the double whammy of demonetisation and support of lawyers who will be staring at contempt of court. Let’s see how the things play out.

As to the issue in hand, SARFAESI act, passed in 2002 gives the banks right to seize the property of a loan defaulter and dispose it off in manner it feels fit through a dedicated tribunal. The background of the noise created is this – SBI moved to seize the property of a few defaulters in Jammu and they moved to the High Court stating that, SBI, being originated outside J&K, doesn’t have any right to hold property in J&K and that the notice issued should be trashed. Basically, what they said was, I will take a loan against a surety, I won’t pay the loans and I won’t let you have my property. In such a case, why would any bank be interested in giving loans in J&K? J&K High Court upheld the petitioner’s view that SBI can’t own any land in J&K and hence, can’t seize the land. It also said, the bank can approach to the problem using existing laws. 
SBI, naturally, went to Supreme Court. Well, Supreme Court royally trashed the High Court judgement. Some of them may be sourced from older judgements, but below is the main crux of what Supreme Court said – 
  1. J&K is an inalienable part of India and J&K Constitution is subordinate to Indian Constitution, not equal. J&K doesn’t have any sovereignty whatsoever.
  2. Any laws passed by Centre, if it clash with state government laws, the state government law will have to give way
  3. Anything which is not in the state list of J&K in Article 370 becomes the property of Central Government. Traditional view held is that anything which is in Centre’s list will become the property of state and that anything passed by Indian Parliament will have to be ratified by J&K Assembly.
Obviously, this will rankle Kashmiri separatists. It looks like, to mollify them, J&K government came up with a proposal to create an entity which handles loan defaults which will contain J&K Bank as the major shareholder. This makes the entity a J&K based one and it can seize the property in place of non J&K banks. How much support will centre give to such an entity, I seriously don’t know.
Now, look at the scenario. There is a defaulter and the bank seizes his property. As far as I understand, according to the act, it should be sold only to a person in J&K. This raises two questions –
  1. If there is no buyer ready to buy, what will the bank do? Can it say, since no person in J&K is ready to buy, I will sell it to an outsider? May be, the act, now, says the buyer should be a J&K resident only. What will stop the Parliament to modify it to open the property to the whole country?
  2. After all, a bank like SBI is a wing of Central Government. Can the bank transfer property to Central Government? Now, what happens if Central Government maintains a huge list of properties in J&K, mainly in the Valley and pump in Kashmiri Pundits which these separatists opposed tooth and nail?
Can these separatists accept either of these? Another interesting side effect of this judgement is that property ownership in J&K is cut down by loan defaults. Similar unrelated laws can be used by the central government to make Article 370 completely meaningless. May be, that’s from the geopolitical aspect, but the ground reality is that with banks having an option to address loan defaults, the incidence of loans in J&K will increase, and along with it, entrepreneurship and job creation potential.

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