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Home > Articles > Business Law > Securitisation Act is Violative of the Right To Shelter as a Fundamental Right



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Securitisation Act is Violative of the Right To Shelter as a Fundamental Right

By : Narendra Sharma on 11 April 2011 Report Abuse Print Print this
 



 

1.1 Hon’ble Supreme Court in U.P. Avas Evam Vikas Parishad & Anr. Vs. Friends Coop. Housing Society Ltd. & Anr. (AIR 1996 SC 114; Date of Judgment 24/04/1995) held that “Right to shelter  is  a fundamental right, which springs from the right to residence assured in  Art.19(1) (e)  and right to life under Art. 21 of the Constitution.”

 

1.2 Further, Supreme Court in State Of Karnataka & Ors Vs. Narasimhamurthy & Ors. (AIR 1996 SC 90, Date of Judgment 11/08/1995) held that “Right to shelter is  a fundamental right under Article 19 (1) of the Constitution. To make the right meaningful to the poor,   the State has  to    provide  facilities and opportunity to build house.  Acquisition  of  the  land  to provide house  sites to the  poor  houseless  is  a  public purpose as  it is  a constitutional  duty of  the  State  to provide house sites to the poor…”

 

1.3 In Chameli Singh & Ors. v. State of  U.P. &  Anr. [(1996) 2 SCC 549], a bench of three Judges of  Supreme Court had considered and held that the right to shelter  is a  fundamental  right  available to every citizen and  it was read into Article 21 of the Constitution of India  as encompassing within its  ambit, the  right  to shelter to  make the  right  to life  more  meaningful. 


1.4 In Shantistar Builders  v. Narayan Khimalal Toame [(1990) 1 SSC 520], another  bench of three judges of  Supreme Court had held that  basic needs of  man have  traditionally been accepted to be three food, clothing and shelter. The right to life is guaranteed in any civilised society.  That would          take within it sweep the right  to food, the  right to  clothing, the  right to decent environment  and a reasonable accommodation to live.


1.5 In Olga Tellis v. Municipal Corporation of Greater Bombay [(1965) 3 SCC 545] a five judge Constitution Bench of  Supreme Court had considered  the right  to  dwell  on pavements or  in slums by the indigent and  the  same was accepted as  a part of right to life enshrined under Article 21; their  ejectment   from the place nearer  to their work would be  deprivation of  their right to  livelihood. They will be deprived of  their livelihood if they are evicted from their  slum  and  pavement dwellings.  Their  eviction tantamount to  deprivation  of their  life.  The  right  to livelihood is  a traditional  right to live, the easiest way of depriving  a person of his right to  life would  be  to deprive him  of his  means of  livelihood to  the  point  of abrogation. Such deprivation would not only denudes the life of its effective  content and meaningfulness but it would make  life impossible to live. The deprivation of right to life, therefore, must be consistent with  the  procedure established by law.

 

1.6 In P.G.  Gupta  v. State of  Gujarat [(1995) Supp. 2 SCC 182], another bench of three Judges of  Supreme Court had considered the mandate of human right to shelter and read it into Article 19(1)(e) and Article 21 of the Constitution.

 

1.7After discussing aforesaid cases, Hon’ble Supreme Court in Ahmedabad Municipal Corporation Vs. Nawab Khan Gulab Khan & Ors (AIR 1997 SC 152; Date of Judgment:11/10/1996) held that “The right to life  enshrined   under  Article 21 has been interpreted by this Court  to include meaningful right  to life and  not  merely  animal  existence  as  elaborated  in several judgments of this Court including Hawkers case, Olga Tellies case and the latest Chameli Singh's case and host of other decisions which need  no reiteration.  Suffice it  to state that  right to  life would  include right to live with human dignity. As held earlier, right to residence is one of the minimal human rights as fundamental right.”


2.1 Sub-section (1)(f) of Section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “the Securitisation Act”) has defined the term "borrower" as follows:

 

"borrower" means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who becomes borrower of a securitisation company or reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance;                                                                       (italics supplied)

 

2.2 Sub-section (1)(zc) of Section 2 of the Securitisation Act has defined the term "secured asset" as follows:

 

"secured asset" means the property on which security interest is created;

 

2.3 Sub-section (1)(zf) of Section 2 of the Securitisation Act has defined the term "security interest" as follows:

 

"security interest" means right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and includes any mortgage, charge, hypothecation, assignment other than those specified in section 31;

 

2.4 Sub-section (4) of Section 13 of the Securitisation Act has, inter alia, provided as follows:

Section 13. Enforcement of security interest.-

(4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-

 

(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;

(b)(c)(d)……..x                       x                                     x

 

2.5 Usually the primary security taken by the Bank / secured creditor from the borrower to secure the debt are as follows:

CC (Hypothecation): First charge over all the current assets of the borrower company.

Term Loan: Hypothecation / pledge of machinery / fixed assets created out of Bank Finance.

Collateral (Movable / Immovable Property) for total fund based limit:

Equitable mortgage of a plot of land and/or a self occupied residential house owned by a Director or a Guarantor of the borrower company.

 

2.6 All the aforesaid assets fall within the term "secured asset" as defined in sub-section (1)(zc) of Section 2 of the Securitisation Act. Therefore, as provided in clause (a) of sub-section (4) of Section 13 the secured creditor may take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured assets. It is pertinent to note here that the secured creditor may realise the secured assets, including a self occupied residential house, by way of lease, assignment or sale. In view of that, all the secured assets of the borrower may be realised by a common course of action and there is no special procedure established by the Securitisation Act to take possession and sale of a self occupied residential house.

 

3.1 Article 21 of the Constitution of India, 1949 has provided as follows.

“Protection of life and personal liberty. - No person shall be deprived of his life or personal liberty except according to procedure established by law.”

 

3.2 As discussed earlier, right to life would  include right to live with human dignity and right to residence is one of the minimal human rights as fundamental right. The deprivation of right to life, therefore, must          be consistent with the  procedure established by law. It is pertinent to note here the maxim Nemo de Domo sua extrahi potest means ‘No one may be dragged from his own house’ and another maxim Nemo potest esse simul actor et judex means ‘No one can be at once suitor and judge’. However, as provided in clause (a) of sub-section (4) of Section 13 of the Securitisation Act the secured creditor may realise the secured assets, including a self occupied residential house, by way of lease, assignment or sale by a common course of action and there is no special procedure established by the Securitisation Act to take possession and sale of a self occupied residential house. This is in gross violation of right to residence as fundamental right of the individual Director/Partner/Proprietor and/or Guarantor of the borrower company/firm.

 

3.3 The approach in the interpretation of fundamental rights has been highlighted in M. Nagaraj & Ors. Vs. Union of India & Ors. (2006) 8 SCC 212 wherein Supreme Court observed as under: (SCC pp. 241-42, para 20)

 

“20……..After three decades, the Supreme  Court overruled its previous decision in A.K. Gopalan v. State of Madras (AIR 1950 SC 27) and held in its landmark judgment in Maneka Gandhi v. Union of India (1978) 1 SCC 248  that the procedure contemplated by Article 21 must answer the test of reasonableness. The Court further held that the procedure should also be in conformity    with   the   principles of natural justice. This example is given to demonstrate an instance   of    expansive interpretation of a fundamental right. The expression 'life' in Article 21 does not connote merely physical or animal existence. The right to life includes right to live with human dignity. This Court has in numerous cases deduced fundamental features which are not specifically mentioned in Part-III on the principle that certain unarticulated rights are implicit in the enumerated guarantees."

 

3.4(a) Recently in State Of West Bengal & Ors. v. The Committee For Protection Of Democratic Rights, West Bengal & Ors. {(2010) 3 SCC 571; Decided on 17.02.2010} a five judge constitution bench of Supreme Court observed as under: (SCC pp. 598, para 64)

 

“64. Thus, the opinion of this Court in A.K. Gopalan (supra) to the effect that a person could be deprived of his liberty by `any' procedure established by law and it was not for the Court to go into the fairness of that procedure was perceived in Maneka Gandhi (supra) as a serious curtailment of liberty of an individual and it was held that the law which restricted an individual's freedom   must   also   be   right,   just   and    fair   and   not arbitrary, fanciful or oppressive. This judgment was a significant   step   towards   the    development    of    law   with respect to Article 21 of the Constitution, followed in a series of subsequent decisions. This Court went on to explore the true meaning of the word "Life" in Article 21 and finally opined that all those aspects of life, which make a person live with human dignity are included within the meaning of the word "Life".

 

3.4(b) Thus,   having      examined     the   rival     contentions      in    the context    of   the   Constitutional Scheme, Supreme Court concluded as follows: (SCC pp. 600, para 68)

 

“68(i).The fundamental rights, enshrined in Part III of the Constitution, are inherent and cannot be extinguished by any Constitutional or Statutory provision. Any law  that abrogates or abridges such rights would be violative of   the   basic structure doctrine. The actual effect and impact of the law on the rights guaranteed under Part III has to be taken into account in determining whether or not it destroys the basic structure.”

 

3.4(c) Supreme Court further observed as under: (SCC pp. 602, para 69)

 

“69…….Being the protectors of civil liberties of the citizens, this Court and the High Courts have not only the power and jurisdiction but also an obligation to protect the  fundamental rights, guaranteed by Part III in general and under Article 21 of the Constitution in particular, zealously and vigilantly.”

 

Conclusion

4.1 However, on the contrary, as provided in clause (a) of sub-section (4) of Section 13 of the Securitisation Act the secured creditor may realise the secured assets, including a self occupied residential house, by way of lease, assignment or sale by a common course of action and there is no special procedure established by the Securitisation Act to take possession and sale of a self occupied residential house. This is clearly in gross violation of right to residence as fundamental right of the individual Director/Partner/ Proprietor and/or Guarantor of the borrower company/firm. The fundamental rights, enshrined in Part III of the Constitution, are inherent and cannot be extinguished by any Constitutional or Statutory provision. Any law  that abrogates or abridges such rights would be violative of   the   basic structure doctrine. Consequently, the Securitisation Act is violative of the right to residence as fundamental right as well as the basic structure doctrine. As discussed above, being the protectors of civil liberties of the citizens, the Supreme Court and the High Courts have not only the power and jurisdiction but also an obligation to protect the fundamental rights, guaranteed by Part III in general and under Article 21 of the Constitution in particular, zealously and vigilantly. (END)

 

Note: the views expressed are my personal and a view point only.

 

Author:

Narendra Sharma, Consultant (Legal)

E-mail: nkdewas@yahoo.co.in

 

 


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4 Comments for this Article



Adinath@Avinash Patil

Adinath@Avinash Patil

Wrote on 21 April 2011

THANX NARENDRA FOR IMPORTANT ARTICLE IT WILL HELP ALL ADVOCATES.



Narendra Sharma

Narendra Sharma

Wrote on 13 April 2011

DEAR SIRS-Kindly also refer MY BLOG "Execution of Notice u/s 13(4) of the Securitisation Act by the Bank".Regards-N.K.SHARMA



J. P. Shah

J. P. Shah

Wrote on 12 April 2011

Thanks for such a useful and detailed article.












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