Supreme Court: Dealing with the matter where it was contended that a Sale Notification issued under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) was in infraction of Section 187 of the Tripura Land Revenue and Land Reforms Act, 1960, the Court held that the dominant legislation being the Parliamentary legislation, the provisions of the Tripura Act of 1960 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.

Applying the test of ‘dominant legislation’ on the encroachment in the present case, the Court, explaining the difference between the Central and State Law, said that 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. Section 187 of the Tripura Act of 1960, on the other hand, prohibits the bank from transferring the property which has been mortgaged by a member of a scheduled tribe to any person other than a member of a scheduled tribe.

The bench of Ranjan Gogoi and Abhay Manohar Sapre, JJ, hence, said that sale of mortgaged property by a bank is an inseparable and integral part of the business 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. [UCO Bank v. Dipak Debbarma, 2016 SCC OnLine SC 1391, decided on 25.11.2016]

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