Political consequences apart, Justices MH Attar and AM Magrey have paved the way for financial anarchy by inhibiting banks and financial institutions from recovering money from borrowers. In Bhupinder Singh Sodhi and Ors Vs. Union of India and Ors, and Santosh Gupta Vs. Union of India and Ors (OWP No.530/2007 and OWP No.1031/2004), the J&K High Court ruled against The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFAESI), which aims to facilitate and ensure immediate recovery of finances/money which was/is due to financial Institutions from borrowers.

Counsel for some petitioners argued that the authority created and mechanism prescribed by section 13 of the Act is, in essence, a judicial authority, and hence beyond the legislative competence of the Union Parliament, and should be declared illegal. Another counsel said the mechanism prescribed under Article 370 of the Constitution of India, for application of laws to J&K, has not been followed. Hence, the State of J&K has itself filed a writ petition in Jammu Wing of the Court, objecting to enforcement of the SARFAESI Act.

All counsel insisted that as section 13 of the SARFAESI Act has the potential of transferring the interests in the immovable property of State Subjects to Non State Subjects, as the bank is a juristic person and most banks who are not banks of the State of J&K, whose Head Offices /Corporate Offices are located outside and whose Board of Directors comprise of Non State Subjects alone, it is not permissible for them under State laws to create interest in immovable property in the State of J&K.

As long as such cussed interpretations of law are invoked, the Centre should order all nationalised banks to withdraw from the State and all financial institutions to cease lending to these pampered ‘State subjects’. Little wonder the State is unable to attract meaningful investments that generate local employment.

The J&K Bank counsel argued that under Entry 45 of the Union List, Parliament is competent to legislate the said Act, and that the Central Government amended the Rules and prescribed that while enforcing the Act of 2002, the interests in the immovable property can be transferred only in favour of the State subject. He added that huge sums have crystallised into Non Performing assets and withholding huge amounts by borrowers is directly and adversely affecting the State’s economic growth. The Assistant Solicitor General of India and counsel for other respondent banks insisted SARFAESI was capable of being enforced in the State and did not impinge upon the federal structure of the Constitution of India or the State Constitution.

The High Court relied principally upon the Supreme Court verdict in Prem Nath Koul vs. State of J&K (AIR 1959 SC 749), which deals with Maharaja Hari Singh and specifies (Clause 8) that nothing in the Instrument of Accession effects continuance of the Maharaja’s sovereignty in and over his State, save as provided by or under the Instrument of Accession (viz. defence, external affairs, communications and ancillary twenty matters).

In 1948, under pressure from the Government of India, the Maharaja appointed an interim government under Sheikh Mohammad Abdullah. The proclamation (Clause 4) enjoined the Council of Ministers to convene an Assembly to frame a constitution for the state, based on adult franchise and representation from each voting area in proportion to its population. Yet, to this day, Jammu province remains grossly under-represented in the J&K Assembly. The Maharaja also nominated four persons to represent J&K in the Constituent Assembly framing the Constitution of India.

In June 1949, under pressure from the Centre, the Maharaja entrusted all his powers to Yuvraj Karan Singh and left the state. On November 25, 1949, the Regent issued a proclamation declaring that the Constitution of India shortly to be adopted by the Constituent Assembly of India shall, in so far as it is applicable to the State of Jammu and Kashmir, govern the constitutional relationship between the State and the contemplated Union of India and shall be enforced in the State by him, his heirs and successors in accordance with the tenor of its provisions. The provisions of the said Constitution would supersede and abrogate all provisions inconsistent therewith which were then in force in the State.

On January 26, 1950, the Constitution of India came into force. Thereafter, the President of India issued the Constitution (application to Jammu and Kashmir) Order, 1950 (C.O. 10) on January 26, 1950, in consultation with the Government of Jammu & Kashmir and in exercise of the Powers conferred by Cl. (1) of Article 370 of the Constitution.

It is baffling why Prime Minister Jawaharlal Nehru insisted on imposing Article 370 in the Constitution of India. Even after Sheikh Abdullah unilaterally abrogated the monarchy in August 1952, and was arrested in August 1953 to prevent him from declaring independence, Mr Nehru persisted with the separate State Constitution (implemented January 1957) instead of bringing J&K straight into the Union.

If the folly of taking the Pakistani aggression to the United Nations is a reason, it was all the more imperative to ensure that the State Constitution conformed totally to the Constitution of India. Instead, the nation was left writhing in a labyrinth of convoluted legislations. Unless there was a secret accord with the departing British rulers, it is inexplicable that a sovereign nation would allow a constituent part to assume quasi-separate status. This deserves an explanation.

The nation’s hopes now rest in the Supreme Court. Article 370 specifically applies to the Government constituted by the Maharaja (i.e., Sheikh Abdullah). Abrogation of the monarchy made Article 370 infructuous; all powers retained by the Maharaja after Accession lapsed to the Union of India. Moreover, the constitutional provisions to amend Article 370 are void as the Constituent Assembly of the State was dissolved in 1956. The Supreme Court should cut through this Gordian knot by declaring Article 370 ultra vires the Constitution of India.