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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

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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.

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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

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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.

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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

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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

1 (1983) 4 SCC 45

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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.”

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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. 2 (2004) 10 SCC 201

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“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

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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

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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.

3 (2010) 3 SCC 571

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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

20014, 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.

4 (2004) 4 SCC 489

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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

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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

5 (2002) 9 SCC 232 6 (1994) 3 SCC 1

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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.

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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

7 (2016) 3 SCC 762

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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

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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

8 (2009) 4 SCC 94

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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

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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

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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.