In an important decision, the Supreme Court has held that land belonging to Scheduled Tribes can be sold by banks to non-tribals for realisation of its dues under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002, in short SARFESI Act.
The judgment flew in the face of a law passed by the State of Tripura, which prohibited banks from selling mortgaged land to anybody outside the tribal community. Since the State law placed a restriction on the operation of a Central law, namely SARFESI Act, an appeal was filed in the apex court by the UCO Bank challenging the validity of the Tripura land Revenue and land Reforms Act, 1960. This law was placed in the Ninth Schedule and thus enjoyed Constitutional immunity under Article 31B.
Since the Central law related to banking activity and State law related to land reform, the apex court came to the conclusion that Section 187 of the Tripura Act of 1960 was an “apparent overstepping” into the area of banking covered by a Central law, since it prohibited banks from selling off mortgaged property.
The Court further observed that the 2002 Act passed by Parliament did not place any bar on the category of purchaser whether it should be tribal or non-tribal. Section 13 of the 2002 Act enabled the bank to take possession of and sell mortgaged property to “any person” to realise its dues.
In such a scenario, the apex court noted that the State law could not legislate that the purchaser of the mortgaged property must be only a tribal. A bench of Justices Ranjan Gogoi and AM Sapre said, “The dominant legislation being the Parliamentary legislation, the provisions of the Tripura Act of 1960 pro tanto would be invalid.”
The apex bench allowed the appeal of the bank and set aside the decision passed earlier by the Agartala Bench of the Gauhati High Court. The earlier decision of the HC had quashed the sale notification issued by the bank on June 26, 2012 by which the mortgaged tribal property was purchased by a non-tribal at an auction price of Rs 416 lakh.
The HC had proceeded on the basis that the State law enjoyed Constitutional immunity under Article 31B and hence the Central law will not prevail against it. But the apex court found the HC to be in error on this point. It said, “Sale of mortgaged property by a bank is an inseparable and integral part of business of banking. So long there did not exist any parallel Central Act dealing with sale of secured assets, the State Act operated validly. But the moment Parliament stepped in enacting such a law dealing exclusively with activities relating to sale of secured assets, the State law, to the extent that it is inconsistent with the 2002 Act, must give way.”