UCO BANK V. DIPAK DEBBARMA[1]

The present case relates to a dispute that arose by application of two seemingly contrary legal provisions. One being the provision in the state law (hereinafter referred as “Tripura Act of 1960” ) which put an embargo on the sale of mortgaged property by the bank to any person who is not member of a scheduled tribe. The other one is the Central law (hereinafter referred as “SARFESI Act of 2002”) that enables the bank to take possession and sell such properties whose owners fail to clear their dues.

 Key concepts

 Centre-State legislative relations, Interpretation of Three lists, Doctrine of pith and substance

 Analysis

 The legislative division of powers is the most important aspect of Centre-State relations in India because it demarcates the ‘Lakshman-rekha’ or boundary that each of them is supposed to follow. One may see it as an exclusive division but with federal supremacy. The other waypoint towards a neutral ground for both the Centre and the States. The former view is based upon limited understanding of non-abstante clause mentioned in Article 246. It needs to be appreciated that the courts first try to reconcile the apparently conflicting provisions following the below mentioned rules before taking the final recourse to the above mentioned clause.

 Rules of interpreting Centre-State legislative entries:

1.    Broadest interpretation – It states that the legislative entries must be read liberally even to include all ancillary or subsidiary matters .

2.    Harmonious interpretation – It is an attempt to construe the entries in a manner that reconciles the conflict and avoid overlapping.

3.    Inter-Relation of Entries – Under this rule a wider meaning is given to a general entry in one list whereas a narrow or specific meaning is given to the inter-related entry in the other list with an attempt to reconcile both the entries.

4.    Doctrine of Pith and Substance – This rule examines objectives of the impugned law with the subject matter of the entry.

5.    Doctrine of Colourable Legislation – This is a remedial course of action adopted by the courts to declare a law bad when the legislature oversteps its competence.

From the above mentioned rules, one can safely conclude the courts have applied enough caution before relying on the non-abstante clause. The present case is also of similar nature where the appellants contended that the provision falls within-subject of Banking as mentioned in the Entry 45 of List I. Whereas, the respondents invoked doctrine of harmonious interpretation trying to show mutually exclusive application of both the provisions.

However, the court relied on ITC v. Agricultural Produce Market Committee and Ors[2] where the learned Judge held that:

“In the event the incidental encroachment conflicts with the legislation actually enacted by the dominant power, the dominant legislation will prevail.” 

Keeping the aforesaid view, the court held that the impugned provision of Tripura Act ,1960 clearly encroach the subject area of Banking which is dealt by the SARFESI Act, 2002 which is the dominant legislation in this case. The court held that sale of mortgaged property by a bank is an inseparable and integral part of the business of banking.

My take

The rules of interpretation certainly put Centre and the state on equal footing when the question arises about the competence of their legislative powers. However, in the present case the court could have given a negative reason for rejecting the state law along with positive reason of accepting the central law as dominant legislation. Thus a question may warrant in future regarding how and why the impugned provision does not meet the objective of the Act not considered as dominating.

In the present case the Tripura Act,1960 had two-fold objectives (i) consolidate the land revenue, and (ii) provide measures of agrarian reforms. Thus, an argument was missing regarding if the mortgaged land is sold to non-scheduled tribe member it may defeat land reforms done in favour of scheduled tribes. This could have been supported with the demography of the region and steps taken for land reforms in favour of scheduled tribes. 

[1]UCO Bank and Ors v. Dipak Debbarma and Ors MANU/SC/1530/2016

[2] ITC Ltd v. Agricultural Produce Market Committee and Ors MANU/SC/0047/2002