9911796707
TMI Blog2023 (7) TMI 1128X X X X Extracts X X X X X X X X Extracts X X X X ..... 02') to sell the mortgaged property being TPV-G-GV-07, The Palm Springs, Village Wazirabad, Sector 54, Gurgaon 122002 (hereinafter 'mortgaged property'). 2. The petitioner bank also prays for directions to respondent nos. 1 and 2 not to take any further actions pursuant to the impugned e-mails dated 29.01.2021 and 18.03.2021 and not to thwart the petitioner bank in any manner with respect to selling of the mortgaged property. Alternatively, directions have also been sought to declare that the petitioner bank has the first charge over the mortgaged property with the further direction to allow it to auction the mortgaged property in accordance with the provisions of the SARFAESI Act, 2002. 3. The facts of the case show that the petitioner bank is a private company incorporated under the Companies Act, 1956 and a Banking Company as defined under Section 5 of the Banking Regulation Act, 1949. 4. Respondent no. 1 is the Deputy General Manager of the Northern Regional Office of respondent no. 2-SEBI which is the regulatory body of the Securities and Commodities market in India, established in accordance with the Securities and Exchange Board of India Act, 1992 (hereinafter 'SEBI Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whatsoever, till further directions: b. The aforesaid entities and persons shall cease and desist from undertaking any activity in the securities market, directly or indirectly, in any manner whatsoever till further directions; c. The aforesaid entities and persons are directed to provide a full inventory of all their assets, whether movable or immovable, or any interest or investment or charge In any of such assets, including details of all their bank accounts, demat accounts and mutual fund investments immediately but not later than 5 working days from the date of receipt of these directions. d. The aforesaid entities and persons are directed not to dispose of or alienate any assets, whether movable or immovable, or any interest or investment or charge in any of such assets excluding money lying in bank accounts except with the prior permission of SEBI. e. Till further directions in this regard, the assets of these entitles shall be utilized only for the purpose of payment of money and/or delivery of securities, as the case may be, to the clients/Investors under the supervision of the concerned stock exchange(s). f. The depositories are directed to ensure that no debit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , issued a demand notice dated 22.11.2019 under Section 13(2) of the SARFAESI Act, 2002 calling upon respondent nos. 3 and 4 and the guarantor to repay the outstanding amount. Respondent nos. 3 and 4 failed to repay the outstanding amount which was Rs. 6,08,72,618/- as of 22.11.2019. 14. Therefore, the petitioner bank took over the symbolic possession of the mortgaged property on 16.03.2020 under Section 13(4) of the SARFAESI Act, 2002. The petitioner bank thereafter filed an application before the concerned District Magistrate under Section 14 of the SARFAESI Act, 2002 for taking over the physical possession which came to be allowed on 15.09.2020. Accordingly, the physical possession of the mortgaged property was taken and a possession notice dated 14.10.2020 was issued, informing respondent no.3 and 4 and the general public that the petitioner bank had taken physical possession of the mortgaged property in the exercise of powers conferred under Section 13(4) of the SARFAESI Act, 2002. 15. A pre-sale notice dated 14.10.2020 was also issued by the petitioner bank, requesting respondent nos. 3 and 4 to clear the outstanding dues, failing which the petitioner bank would be constrai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge in respect of the said property being Villa No. TPV-G-GV-07, The Palm Springs, Village Wazirabad, Sector 54, Gurgaon 122002 and hence the Bank being a valid charge holder/ mortgagee is having paramount charge and is entitled to exercise its statutory right of enforcement of security interest created In the said property for recovery of its dues. 8. In view of the above circumstances and the fact that the ICICI Bank Ltd. is not among the 10 entities named in the order dated 29th May 2018, the Bank is entitled to enforce its security Interest and proceed further with the auction of the properly being Villa No. TPVG- GV-07. The Palm Springs, Village Wazirabad, Sector 54, Gurgaon 122002. However, post adjustment of dues the Bank shall intimate regarding surplus (if any) from the auction sale proceeds to your good office for further direction. We believe and as per our understanding, the Bank can proceed further as per the provisions of the SARFAESI Act, 2002 and prior permission Is not required. Kindly confirm on our understanding." 19. On 18.03.2021, respondent no. 1 replied to the petitioner bank's e-mail dated 04.02.2021 and inter alia stated that the orders dated 29.05.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also placed reliance on various decisions in the cases of Bank of Baroda v. State of Gujarat and Ors. MANU/GJ/188512019., Kalupur Commercial Co-operative Bank Ltd v. State of Gujarat 2019 SCC Online Guj 1892, The Assistant Commissioner (CT), Anna Salai-III Assessment Circle v. The Indian Overseas Bank and Ors. MANU/TN/3743/2016., Bank of Baroda v. Commissioner of Sales Tax, Indore and Ors. MANU/MP/0331/2018., Bhanu Ram and Ors. v. HBN Daries and Allied Ltd. MANU/ND/7107/2019, Principal Commissioner of Income Tax v. Monnet Ispat and Energy Ltd. (2018) 18 SCC 786., State of M.P. & Anr. v. State Bank of Indore & Ors. (2002) 10 SCC 441, Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. (2001) 1 SCC 1, Sahara India Real Estate Corporation Limited & Ors. v. Securities and Exchange Board of India (2013) 1 SCC 1, Franklin Templeton Trustee Services Private Limited & Ors. v. Amruta Garg & Ors. MANU/SC/0430/2021, Shewpunjanrai Indrasanrai Ltd. v. The Collector of Customs and Ors. AIR 1958 SC 845, Punjab National Bank v. Union of India and Others 2022 SCC OnLine 227, Bank of Baroda v. The Deputy Director FPA-PMLA-2115/MUM/2017., Maharaja Pratap Udai Nath Shahi Deo v. Sara Lal Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts can operate in their respective sphere in order to achieve the special purpose for which they have been enacted. 30. While elaborating his submission, he has indicated the legislative intent of the SEBI Act, 1992 which is pre-eminently a social welfare legislation seeking protection of interests of a common man who are small investors. 31. He submitted that the provisions under Section 37 of the SARFAESI Act, 2002 clearly provide the space for the provisions of the SEBI Act, 1992 to operate as it specifically provides that the provisions of the SARFAESI Act, 2002 or the rules made thereunder, are in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the SEBI Act, 1992 (15 of 1992), the RDB Act, 1993 (51 of 1993) or any other law for the time being in force. 32. He, therefore, stated that the provisions of the four Acts mentioned in Section 37 of the SARFAESI Act, 2002 are specifically saved and therefore, the argument advanced by learned counsel appearing on behalf of petitioner is not acceptable. 33. It is further contended by the learned senior counsel for respondent nos. 1 and 2 that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry objection with respect to the maintainability of the instant writ petition on the ground of the availability of efficacious alternative remedy under Section 15T of the SEBI Act, 1992. He submitted that the said Orders which are sought to be declared as not applicable to the petitioner bank, are appealable under Section 15T of the SEBI Act, 1992 before the Securities Appellate Tribunal (hereinafter 'SAT') and according to him, any order passed by the SAT is appealable under Section 15Z of the SEBI Act, 1992 before the Hon'ble Supreme Court. 37. To support his submissions, he has placed reliance on various decisions in the cases of Thansingh Nathmal & Ors. v. Superintendent of Taxes, Dhubri & Ors. AIR 1964 SC 1419., Raj Kumar Shivhare v. Asstt. Director, Directorate of Enforcement & Anr. 2010) 4 SCC 772, Nivedita Sharma v. Cellular Operators Assn of India (2011) 14 SCC 337, State of Maharashtra & Ors. v. Greatship (India) Ltd. 2022 SCC Online SC 1262, para. 13-18, State of Punjab & Ors. v. Gurdev Singh (1991) 4 SCC 1., Kuber Floritech Ltd. v. Securities & Exchange Board of India Writ Petition (c) No. 11426/2022, Order dated 02.09.2022, Delhi High Court. and Balvir Singh v. Securi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ambit and scope of the said Orders, and the nature of the impugned emails. 43. The first issue that the court must then decide is whether SEBI has the requisite legal power vested in it to direct the petitioner bank. 44. Undisputedly in this case, the said Orders have been passed by SEBI, however, the petitioner bank has chosen not to assail those orders, but instead challenges the impugned communications. Respondent nos. 1 and 2's preliminary objection to the same is responded to by the petitioner bank by arguing that SEBI does not have the jurisdiction to direct the petitioner bank, that is, a bank unregistered with SEBI. Assuming arguendo that SEBI does have jurisdiction, the petitioner bank contends that the said Orders do not prevent them from auctioning the mortgaged property, it is, therefore, the impugned emails that infringe their rights and not the said Orders. 45. In Sahara India Real Estate Corporation Limited (supra), the Hon'ble Supreme Court expounded upon the nature of powers conferred upon SEBI. It made the following observations, which were later reiterated in subsequent decisions of the Apex Court. In paragraph no. 108, it has been observed as under: "11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for violation of the SEBI Act or rules or regulations made thereunder. 3. In addition, growing importance of the securities markets in the economy has placed new demands upon the SEBI in terms of organization structure and institutional capacity. A need was therefore felt to remove these shortcomings by strengthening the mechanisms available to the SEBI for investigation and enforcement so that it is better equipped to investigate and enforce against market malpractices. 4. In view of the above, the Securities and Exchange Board of India (Amendment) Ordinance, 2002 (6 of 2002) was promulgated on the 29th October, 2002 to amend the Securities and Exchange Board of India Act, 1992. 5. It is now proposed to replace the Ordinance by a Bill, with, inter alia, the following features (a) increasing the number of members of the SEBI from six (including Chairman) to nine (including Chairman); (b) conferring power upon the Board, for, (i) calling for information and record from any bank or other authority or Board or corporation established or constituted by or under any Central, State or Provincial Act in respect of any transaction in securities which are under investigation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in paragraph no.81, made the following observation: "...Section 11(1), while broadly defining the functions of the Board, states that it is the duty of the Board to protect interest of investors in securities and to promote the development of, and regulate the securities market by such measures as it thinks fit. Section 11-B, which deals with the power of the Board to give directions, states that the Board, after making or causing an inquiry, may issue directions if it is satisfied that it is necessary in the interest of the investors, or orderly development of the securities market; to prevent the affairs of any intermediary or other persons referred to in Section 12 from conducting affairs in a manner detrimental to the interest of the investors or to secure proper management of such intermediary or persons. Section 11(2)(h) provides that the Board is entitled to take measures for regulating substantial acquisition of shares and takeover of companies. Regulation 44 states that the Board while issuing directions, has to keep in mind the interest of the securities market and its role as a protector of interest of investors. We will read the word "or" between the express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Board in accordance with the regulations made under this Act.''. ... 4. In section 11B of the principal Act, the following Explanation shall be inserted, namely:- ''Explanation.-For the removal of doubts, it is hereby declared that the power to issue directions under this section shall include and always be deemed to have been included the power to direct any person, who made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act or regulations made thereunder, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention.''." 49. As on date, Section 11 of the SEBI Act, 1992, which provides for the functions of SEBI, reads as under: 11. Functions of Board.-(1) Subject to the provisions of this Act, it shall be the duty of the Board to protect the interests of investors in securities and to promote the development of, and to regulate the securities market, by such measures as it thinks fit. (2) Without prejudice to the generality of the foregoing provisions, the measures referred to therein may provide for- (a) regulating the business in stock exchanges and any other se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion) Act, 1956 (42 of 1956), as may be delegated to it by the Central Government; (k) levying fees or other charges for carrying out the purposes of this section; (l) conducting research for the above purposes; (la) calling from or furnishing to any such agencies, as may be specified by the Board, such information as may be considered necessary by it for the efficient discharge of its functions;] (m) performing such other functions as may be prescribed. (2A) Without prejudice to the provisions contained in sub-section (2), the Board may take measures to undertake inspection of any book, or register, or other document or record of any listed public company or a public company (not being intermediaries referred to in section 12) which intends to get its securities listed on any recognised stock exchange where the Board has reasonable grounds to believe that such company has been indulging in insider trading or fraudulent and unfair trade practices relating to securities market. (3) Notwithstanding anything contained in any other law for the time being in force while exercising the powers under 9 [clause (i) or clause (ia) of sub-section (2) or sub-section (2A)], the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the rules or the regulations made thereunder shall be allowed to be attached. (f) direct any intermediary or any person associated with the securities market in any manner not to dispose of or alienate an asset forming part of any transaction which is under investigation: Provided that the Board may, without prejudice to the provisions contained in sub-section (2) or sub-section (2A), take any of the measures specified in clause (d) or clause (e) or clause (f), in respect of any listed public company or a public company (not being intermediaries referred to in section (2) which intends to get its securities listed on any recognised stock exchange where the Board has reasonable grounds to believe that such company has been indulging in insider trading or fraudulent and unfair trade practices relating to securities market: Provided further that the Board shall, either before or after passing such orders, give an opportunity of hearing to such intermediaries or persons concerned.] 3 [(4A) Without prejudice to the provisions contained in sub-sections (1), (2), (2A), (3) and (4), section 11B and section 15-I, the Board may, by an order, for reasons to be recorded in writing, le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmediary, issue, necessary direction including but not limited to any or all of the following - (a) directing the intermediary or other persons associated with securities market to refund any money or securities collected from the investors under any scheme or otherwise, with or without interest; (b) directing the intermediary or other persons associated with securities market not to access the capital market or not to deal in securities for a particular period or not to associate with any intermediary or with any capital market related activity; (c) directing the recognised stock exchange concerned not to permit trading in the securities or units issued by a mutual fund or collective investment scheme; (d) directing the recognised stock exchange concerned to suspend trading in the securities or units issued by a mutual fund or collective investment scheme; (e) any other direction which the Board may deem fit and proper in the circumstances of the case: Provided that before issuing any directions the Board shall give a reasonable opportunity of being heard to the persons concerned: Provided further that if the circumstances warrant any interim direction is required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Securities Laws (Amendment) Act, 1995, shall be deemed to have been obtained from the Board in accordance with the regulations providing for such registration. (1A) No depository, participant, custodian of securities, foreign institutional investor, credit rating agency, or any other intermediary associated with the securities market as the Board may by notification in this behalf specify, shall buy or sell or deal in securities except under and in accordance with the conditions of a certificate of registration obtained from the Board in accordance with the regulations made under this Act: ... [Emphasis supplied] 54. Securities and Exchange Board of India (Bankers to an Issue) Regulations, 1994 in Regulation 2(aa) defines 'banker to an issue' and in Regulation 2(e) defines a 'scheduled bank', which read as under: "2(1) ... (aa) "banker to an issue" means a scheduled bank carrying on all or any of the following activities, namely :- (i) acceptance of application and application monies; (ii) acceptance of allotment or call monies; (iii) refund of application monies; (iv) payment of dividend or interest warrants;" ... "(e) "scheduled bank" means a bank i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustive list provided under Section 12 is not repeated in any part of the SEBI Act, 1992. It thus gives credence to the point that if a provision under the SEBI Act, 1992, intends to refer to the persons or class of persons enumerated under Section 12 with the qualification of registration, words to that effect, must be provided for, in the provision making the reference to the Section. 61. There is thus only one plain meaning that can be given to Section 11B(1)(iii)(a), it being, that persons or class of persons referred to in Section 12, are referred irrespective of the registration under Section 12. In other words, in order for Section 11B(1)(iii)(a) to be attracted, one may only need to fall in the person or class of persons referred to in Section 12 irrespective of their registration with SEBI. 62. It may be true that this construction, casts the web of powers that SEBI enjoys, to a larger degree than the other narrower construction would have. But merely on the basis of the consequences, this court cannot limit the plain meaning of a text. 63. In this regard, GP Singh's Principles of Statutory Interpretation 15th Ed., pp. 38-39 notes as under: "When the words of a statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntent of them that made it"[4 Co. Isnt. 330.] and that intent is to be deduced from the language used.[Capper v. Baldwin [1965] 2 QB 53, 61 per Lord Parker CJ.] Ideally, as stated above, the words of the legislation will be precise and unambigoius and wherever they are they are the best and only true means of declaring the intention of the legislature. As Tindal C.J. said in Warburton v. Loveland [(1832) 2 D. & Cl. (HL) 480, 489]- "Where the language of an Act is clear and explicit, we must give effect to it, whatever may be the consequences, for in that case the words of the statute speak the intention of the legislature."" [Emphasis supplied] 65. On consequences of clear language, page 613, paragraph no. 17.1.4 of Craies on Legislation (supra) the following is stated: "The principal effect of the cardinal rule, subject to the restrictions and modifications explored below, is that a court is bound to give effect to clear legislative language even if the consequences in the instant case are such that the legislature did not contemplate and would not have countenanced. As Jervis C.J. said in Abley v Dale (1850) 20 LJCP 33, 35 - "If the precise words used are plain and una ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1992 need to be exercised in a manner such that they do not come in conflict with, or curtail the effect of, other laws. Meaning thereby, that the exercise of power by SEBI, which is conferred upon it by the SEBI Act, 1992 remain a legal and legitimate exercise of power only, and insofar as, it does not breach the mandate of other laws. 73. In the facts of the instant case, SEBI does have the power to direct the petitioner bank, however, that power must be exercised with due caution. It must not be exercised so as to curtail the effect of other laws. 74. From the above analysis, it can be concluded that SEBI is possessed with powers under the SEBI Act, 1992 to direct the petitioner bank in specific, and banks in general, regardless of them being registered with SEBI. 75. Having decided on competency, it must now be examined whether the said Orders prevent the petitioner bank from alienating the mortgaged property of respondent no. 3 and 4. 76. In order to better appreciate the tenor of the said Orders, their material parts are reproduced as under. The relevant portion of the Order dated 29.05.2018 passed by the Whole Time Member of SEBI reads as under: "... 27. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed except for the purpose mentioned in sub-para (e) after confirmation from the concerned stock exchange in this regard. h. The banks are directed to ensure that no debits are made in the bank accounts held jointly or severally by F6 Finserve Private Limited, F6 Commodities Private Limited, Mr. Pankaj Goel, and Mr. Meenu Goel, except for the purpose of payment of money to the clients/investors under the written confirmation of the concerned stock exchange(s). i. The above directions are without prejudice to the right of SEBI total any other action that may be initiated in respect of aforesaid entities/persons. 28. As noted above, during the inspection it has been observed that F6 had misused the securities and funds of its clients to the benefit of a few specific clients. In my view it is essential that the role of such clients is examined in detail in the ongoing inquiry examination by SEBI. 29. The findings recorded in the order are based on the prime facie examination of facts and prima facie violation of law. 30. This order shall come into force with immediate effect. A copy of this order shall be forwarded to all the Stock Exchanges, the relevant banks, Registrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. In this are included the directions found in paragraph nos. 27(a)-(d). The second species relate to directions issued to persons and entities connected with the securities market them being depositories, registrars and transfer agents. This includes the directions in paragraph nos. 27(f) and (g). Third category relate to directions issued to persons and entities that are neither necessarily part of the investigation, nor compulsorily connected with the securities market. This includes directions in paragraph nos. 27(e) and (h) and 30. 79. Ex facie it may be seen that the petitioner bank is not a registrar to an issue or a share transfer agent, however it may be briefly examined whether the petitioner bank is a 'depository', and therefore falls under the second species of directions. The word 'depository' has not been defined under the SEBI Act, 1992, however, Section 2(2) of the SEBI Act, 1992 provides that words and expressions that remain undefined under the SEBI Act, 1992 shall borrow their meanings from the Securities Contracts (Regulations) Act, 1956 or the Depositories Act, 1996. Section 2(2) of the SEBI Act, 1992 is reproduced as under: "(2) Words and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Notably, this classification between "persons" and "entities" stems from the direction contained in paragraph no. 27(a). This paragraph enlists certain companies namely F6 Finserve Pvt. Ltd. and F6 Commodities Pvt. Ltd. as well as certain individuals, including respondent nos. 3 and 4. The companies, in subsequent paragraphs have been referred to as "entities" while the individuals are termed as "persons". 88. The mortgaged property undoubtedly belongs to respondent nos. 3 and 4, who are individuals or "persons" as opposed to "entities". It is therefore the case that the directions contained in paragraph no. 27(e) do not prevent the assets of respondent no.3 and 4, including the mortgaged property, from being alienated. 89. Reading the directions in paragraph no. 27(e) with paragraph no. 30 also offers no assistance to the respondents. The direction contained in paragraph no. 30 merely stipulates that the order dated 29.05.2018 is to be communicated to certain entities and persons in order to ensure compliance with the directions in the preceding paragraphs. Thus, paragraph no. 30, does not order anything not already ordered, nor does it direct anything not already directed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank to realise the debt owed to it by respondent nos. 3 and 4. 98. From the above analysis, it can be concluded that though the said Orders apply to the petitioner bank, and SEBI possesses the requisite legal power to direct the petitioner bank, the precise and specific wording of the directions is not of such a nature that the petitioner bank is prevented from alienating the assets of respondent no.3 and 4, including the mortgaged property. 99. Having come to this conclusion, it is unnecessary to consider whether the said Orders operate in rem or in personam. A finding on the nature of the said Orders cannot modify or alter the content of the direction. The said Orders do contain directions that are applicable to the petitioner bank, and SEBI has powers vested in it by law, however, the precise wording of the directions contained within them, does not contain an order that prevents the petitioner bank from dealing with the property of respondent nos. 3 and 4 which is mortgaged to it, and realising it, in accordance with law. 100. That being the case, this courts finds it unwarranted to decide upon the academic issue whether orders passed under Sections 11(4), 11B and 11D of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r movable or immovable, or any interest or investment or charge in any of such assets excluding money lying in bank accounts except with the prior permission of SEBI..." 5. Vide email dated 29.05.2018 and 14.12.2018 the Copy of the order was also sent to ICICI bank. For reference the copy of the orders is being enclosed herewith. Considering the above directions are in place you are advised to ensure compliance of SEBI orders." [Emphasis supplied] 105. The material part of the e-mail dated 18.03.2021 reads as follows: "With reference to trailing mail it is informed that the interim orders issued by SEBI invokes powers under sections 11(1), 11(4), 11B and I1D of the SEBI Act, 1992 partakes the character of 'an order in rem' and binds all constituents dealing with the broker or his assets/liabilities till the compliance of investigation/forensic audit. Such interim freezing orders cannot be stated to be binding only on the person/entity which has contravened the provisions of securities laws but also binds other constituents in the market such as banks, Companies, intermediaries etc. who have dealings with the subject assets of the Stock broker or entered into transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Orders operate in rem, cannot change the material terms of the direction. They cannot make the direction applicable to persons to whom it is not applicable. For instance, it cannot be the case, that a direction that requires a person 'x' to do or to omit from doing a particular act, when found to be in rem, requires the rest of the world, including persons and entities not specifically directed as also those completely unconnected with the proceedings, to ensure that 'x' actually does or forebears from doing that particular act. The reasoning contained in the impugned emails is thus erroneous. 112. Therefore, the said e-mails, expand the scope of the said Orders, and are inconsistent with it. 113. From the abovementioned analysis, it can be concluded that the impugned emails were erroneous and wholly without jurisdiction. 114. This court must now holistically examine the issue of maintainability in light of the above reached conclusions on the ancillary and incidental issues. 115. In Thansingh Nathmal (supra), it was held by the Hon'ble Supreme Court that despite the wording of Article 226 of the Constitution of India being broad, there must be certain self-imposed limitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs passed by SEBI were under challenge. 120. In Raj Kumar Shivhare (supra) the Apex Court ruled that the Hon'ble High Court patently erred in allowing a writ petition in exercise of powers under Article 226 of the Constitution of India even when the petitioner had failed to demonstrate as to why the alternative statutory remedy in the form of an appeal under Section 35 of the Foreign Exchange Management Act, 1999 is not efficacious. 121. Further, Kuntesh Gupta (supra) and Whirlpool Corporation (supra), have been relied on; the said cases exhort that in cases where the impugned order/action is wholly without jurisdiction and in cases where the principles of natural justice have not been followed, the existence of an alternate remedy shall not act as a bar for the invocation of a High Court's powers under Article 226. The material part of Whirlpool Corporation (supra) is reproduced as under: "14. The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution This power can be exercised by the High Court not only for issuing writs in the nature of Habeas Corpus, Mandamus, prohibition, Qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the exercise of writ powers conferred by Article 226 of the Constitution having come across certain orders passed by the high courts holding writ petitions as "not maintainable" merely because the alternative remedy provided by the relevant statutes has not been pursued by the parties desirous of invocation of the writ jurisdiction. The power to issue prerogative writs under Article 226 is plenary in nature. Any limitation on the exercise of such power must be traceable in the Constitution itself. Profitable reference in this regard may be made to Article 329 and ordainments of other similarly worded articles in the Constitution. Article 226 does not, in terms, impose any limitation or restraint on the exercise of power to issue writs. While it is true that exercise of writ powers despite availability of a remedy under the very statute which has been invoked and has given rise to the action impugned in the writ petition ought not to be made in a routine manner, yet, the mere fact that the petitioner before the high court, in a given case, has not pursued the alternative remedy available to him/it cannot mechanically be construed as a ground for its dismissal. It is axiomatic t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat whether a certain item falls within an entry in a sales tax statute, raises a pure question of law and if investigation into facts is unnecessary, the high court could entertain a writ petition in its discretion even though the alternative remedy was not availed of; and, unless exercise of discretion is shown to be unreasonable or perverse, this Court would not interfere. In the latter decision, this Court found the issue raised by the appellant to be pristinely legal requiring determination by the high court without putting the appellant through the mill of statutory appeals in the hierarchy. What follows from the said decisions is that where the controversy is a purely legal one and it does not involve disputed questions of fact but only questions of law, then it should be decided by the high court instead of dismissing the writ petition on the ground of an alternative remedy being available." [Emphasis supplied] 124. From the conspectus of authorities set out above, the position of law that emerges is that normally a High Court may not entertain a writ petition in which the reliefs prayed for, can be claimed from an alternate forum; however, this self-imposed rule is of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an appeal, it was held that in order to ascertain whether a communication or decision amounts to an order within the meaning of Section 15T, its substance and not its form has to be seen. If a particular direction, request or observation is binding and has penal consequences for its violation, the same will have to be treated as an order. 129. Subsequently, Radha Krishan Industries, State of H.P. (supra), Jashbhai Motibhai (supra), Ramprasad Somani (supra), detail out the exceptions to the rule of alternate remedy and the importance of a legal infringement for having a locus standi. 130. It is pertinent to mention an important finding in Ramprasad Somani (supra), it being that the meaning of the words "person aggrieved" as they appear in Section 15T of the SEBI Act, 1992 are nowhere defined and must be construed in the context in which they appear, and they are to be determined whilst considering whether the rights of a person, who is aggravating his concern, has been infringed. 131. Considering the findings reached by this court in the preceding paragraphs, this court is of the opinion that the said Orders are rightly not challenged by the petitioner bank. The petitioner ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition to be maintainable. 137. It must also be seen that the e-mail dated 29.05.2018 was sent by respondent no. 1, after being agitated by the petitioner bank's public notice for the auction of the mortgaged property. The communications, though couching themselves under the garb of the said Orders, in effect direct the petitioner bank to not proceed with the auction of the mortgaged property. The statutory right of the petitioner bank guaranteed by the SARFAESI Act, 2002, is thus thwarted by the impugned e-mails. There is sufficient obstacle caused to the petitioner bank by their financial interest being compromised. An email from the Deputy General Manager of SEBI i.e., respondent no. 1, that unfairly prevents the petitioner bank from exercising its legal rights, is sufficient cause to approach this writ court. 138. This court is, therefore of the considered opinion that since the impugned e-mails/communications were erroneous and wholly without jurisdiction; and the said Orders do not prevent the petitioner bank from auctioning the mortgaged property, the present writ petition is maintainable. 139. This court must now decide the issue, which was argued at length before this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court wherein Hon'ble Justice C.K. Thakker and Hon'ble Justice Atlamas Kabir had had a difference of opinion on the interpretation of Section 35 of the RDB Act, 1993. Hon'ble Justice S.A. Bobde authoring for the three-judge Bench resolved the conflict between the SICA Act, 1985 and the RDB Act, 1993 by giving a finding in favour of the SICA Act, 1985. Paragraph nos. 37-41 of the judgment are reproduced as under: "37. Sub-section (2) was added to Section 34 of the RDDB Act w.e.f. 17.01.2000 by Act No. 1 of 2000. There is no doubt that when an Act provides, as here, that its provisions shall be in addition to and not in derogation of another law or laws, it means that the Legislature intends that such an enactment shall co-exist along with the other Acts. It is clearly not the intention of the Legislature, in such a case, to annul or detract from the provisions of other laws. The term "in derogation of" means "in abrogation or repeal of." The Black's Law Dictionary sets forth the following meaning for "derogation": The partial repeal or abrogation of a law by a later act that limits its scope or impairs its utility and force. It is clear that Sub-section (1) contains a no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edule to the IDR Act, as mentioned earlier, whereas the RDDB Act deals with all persons, who may have taken a loan from a bank or a financial institution in cash or otherwise, whether secured or unsecured etc." [Emphasis supplied] 144. The judgement of KSL Industries Ltd. (supra) is, however, distinguishable. As was noted in paragraph no. 35 of Madras Petrochem Ltd. (supra), the non-obstante clause contained in Section 34(1) of the RDB Act, 1993 explicitly provides for a carve out, and makes itself subject to Section 34(2). This is not the case with the non-obstante clause contained in Section 35 of the SARFAESI Act, 2002. This is an important distinction between the provisions of the RDB Act, 1993 and the SARFAESI Act, 2002 as it affects the scope of the non-obstante clause, and the effect it shall have. In order to better appreciate the difference, the provisions are reproduced. 145. Section 34 of the RDB Act, 1993 is reproduced as under: "34. Act to have over-riding effect.-(1) Save as provided under sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the RDB Act, 1993 is expressly curtailed by the rider provided in the Section itself, it being the carve out for sub-section (2). This saving for sub-section (2) is done in a manner, such that the effect of the non-obstante clause is curtailed. Sub-section (2) is then interpreted in light of the curtailed non-obstante clause. In other words, while interpreting sub-section (2) i.e., the non-derogation provision, the nonobstante clause contained in Section 34(1) has no application. This is not the case under the SARFAESI Act, 2002. The non-obstante clause contained in Section 35 of the SARFAESI Act, 2002 is not made subject to Section 37. Section 37 of the SARFAESI Act, 2002 must then be construed in light of the unfettered non-obstante clause under Section 35. 149. In Mathew Varghese (supra), the Hon'ble Supreme Court had an occasion to consider the meaning of the expression "not in derogation of" in Section 37 of the SARFAESI Act, 2002 and the effect it shall have. In paragraph no.43, the Hon'ble Supreme Court stated as under: "43. A reading of Section 37 discloses that the application of SARFAESI Act will be in addition to and not in derogation of the provisions of the RDDB Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her laws in the same or related field and having regard to the scheme of the SARFAESI Act and the dominant purpose sought to be achieved, as noted above, none can and should be allowed to take the auctions conducted thereunder lightly. No court ought to countenance a bidder entering and exiting the process at his sweet will without any real intent to take it to fruition. The provisions of the SARFAESI Act as well as the Rules are to be interpreted positively and purposefully in the context of a given case to give meaning to sub-rule (5) of rule 9. Besides, we have no hesitation to hold that in case of any seeming conflict or inconsistency between the general law, i.e., the Contract Act and the special law, i.e., the SARFAESI Act, it is the latter that would prevail." [Emphasis supplied] 151. The judgement of the House of Lords in the case of Davies (supra), upon which reliance was placed by the learned counsel for respondent nos. 1 and 2 must now be carefully considered. The issue in the cited case is not completely applicable to the present case, however, the reasoning may still be noted. The general question framed by Lord Macmillan was: "...whether in assessing the damage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings and actions by banks under the SARFAESI Act, 1992. 156. Similar is the opinion of the Lord Macmillan on the issue of the construction of the provision. The material part reads as under: "On the interpretation of the provision which I have just quoted I find myself in agreement with the Lords Justices in the Court of Appeal and with all your Lordships. The rights conferred by the Law Reform Act for the benefit of the estates of deceased persons are the rights to maintain after the death of such deceased persons all causes of action vested in them. These rights are to be in addition to and not in derogation of any rights conferred on the dependants of deceased persons by the Fatal Accidents Acts. This means, as I read the words, that on the death of a deceased person it shall be competent to maintain actions both under the Law Reform Act and under the Fatal Accidents Acts. The rights of action in the two cases are quite distinct and independent. Under the Law Reform Act the right of action is for the benefit of the deceased's estate. Under the Fatal Accidents Acts the right of action is for the benefit of the deceased's dependants. Inasmuch as the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the effect it shall have on Section 37 of the SARFAESI Act, 2002 which mentions and mandates the Act to not be in derogation of the SEBI Act, 1992. Secondly, the factual matrix in Bikram Chatterji (supra) evinces averments of fraud on the part of the banks, the same being absent in the present case. 160. The cases of Deputy Director Directorate of Enforcement Delhi (supra), Bank of Baroda (supra), Solidaire India Ltd. (supra) are again found inapplicable as in the present case a simpliciter conflict between two legislations having non-obstante clause is not present. This court is concerned with the interpretation of Section 37 of the SARFAESI Act, 2002 which mentions and mandates the Act to not be in derogation of the SEBI Act, 1992, and the subsequent harmonized interpretation that is required. SICOM Ltd. (supra) is again inapplicable as in the present case the rights and interests of SEBI over the mortgaged property cannot be termed as being that of an unsecured creditor, in simpliciter. 161. Further, the said decisions also need to be given weightage in light of the pronouncement of the Hon'ble Supreme Court in the case of Pegasus Assets Reconstruction P. Ltd. (supra), further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developing its economy. While the banking industry in India is progressively complying with the international prudential norms and accounting practices, there are certain areas in which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating securitisation of financial assets of banks and financial institutions. Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of nonperforming assets of banks and financial institutions... ...These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the court." [Emphasis supplied] 166. The object clause of the SEBI Act, 1992 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act should be construed with reference to other provisions in the same Act so as to make a consistent enactment of the whole statute. Such a construction has the merit of avoiding any inconsistency or repugnancy either within a section or between a section and other parts of the statute. It is the duty of the courts to avoid "a head on clash" between two sections of the same Act and, "whenever it is possible to do so, to construe provisions which appear to conflict so that they harmonise". ... It should not be lightly assumed that "Parliament had given with one hand what it took away with the other". The provisions of one section of a statute cannot be used to defeat those of another "unless it is impossible to effect reconciliation between them". The same rule applies in regard to sub-sections of a section. In the words of Gajendragadkar, J: "The two sub-sections must be read as parts of an integral whole and as being interdependent; an attempt should be made in construing them to reconcile them if it is reasonably possible to do so, and to avoid repugnancy." [Madanlal Fakirchand Dudhediya v. Shree Changdeo Sugar Mills Ltd., AIR 1962 SC 1543.] As stated by Venkatarama Aiya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing an Act is almost invariably to change the existing law so as to remedy a perceived defect in it. That defect is the 'mischief to which the Act is directed. This chapter is concerned with the mischief and its remedy. ... THE MISCHIEF Section 10.2: Meaning of the 'mischief' 10.2 (1) The mischief that Parliament intends an enactment to remedy may be either a social mischief which is coupled with a legal mischief, or a purely legal mischief. (2) A social mischief is a factual situation, present or shortly expected, which Parliament desires to remedy. This may range from something obviously wrong (such as an outbreak of a particular type of antisocial behaviour) to the possibility of improving an already neutral or even beneficial state of affairs. (3) The legal mischief is a condition which constitutes a defect in the law, or is regarded by Parliament as constituting such a defect. The defect may consist of a failure to provide, to the fullest extent possible for no statute law, a remedy for a corresponding social mischief, or it may consist of a purely legal defect in the law without a corresponding social mischief. Comment Parliament is taken to do nothing w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force." [Emphasis supplied] 178. There are thus two aspects of the provision. First is that the Act "shall be in addition to" the second is that it must not be "in derogation of". Indeed they are adjoined by the conjunction 'and', and must be construed together. But a bare reading may allow both the constructions-those favouring the 'non-derogation' mandate or the ones supporting the 'in addition to' endorsement-to be considered as fair. 179. It is, at this stage, that the heading of the provision comes to the assistance of this court. It notes "Application of other laws not barred". A positive mandate is thus inherent in this heading. Conversely, there is an absence of a negative mandate. Meaning thereby, the provision allows for the SARFAESI Act, 2002 to take the aid of the enumerated statutes in order to fulfil its statutory purpose. The provision does not, in any manner, reduce the effect of the SARFAESI Act, 2002. 180. In this context, Bennion on Statutory Interpretation, 7th Ed., p. 444 notes as under: Section 16.7: Hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construing an Act of the Legislature. But conflicting opinions have been expressed on the question as to what weight should be attached to the headings. A Heading, according to one view, "is to be regarded as giving the key to the interpretation of the clauses ranged under it, unless the wording is inconsistent with such interpretation;" and so the headings might be treated "as Preambles to the provisions following them". But according to the other view resort to "the heading" can only be taken when the enacting words are ambiguous. So Lord Goddard CJ expressed himself as follows: While, however, the court is entitled to look at the headings in an Act of Parliament to resolve any doubt they may have as to ambiguous words, the law is clear that those headings cannot be used to give a different effect to clear words in the section where there cannot be any doubt as to the ordinary meaning of the words. [R v. Surrey, (1947) 2 All ER 276.] Similarly, it was said by Patanjali Shastri J: Nor can the title of a Chapter be legitimately used to restrict the plain terms of an enactment. [CIT v. Ahmedbhai Umarbhai, AIR 1950 SC 134.] The Supreme Court has expressed itself as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1992. 185. At the outset, it may be noted that reliance on Section 28A(3) of the SEBI Act, 1992 is misplaced. The present dispute is not concerned with the recovery of amounts by a recovery officer. A bare reading of the provision, would make apparent its inapplicability in the present dispute. Section 28A(3) reads as under: "(3) Notwithstanding anything contained in any other law for the time being in force, the recovery of amounts by a Recovery Officer under sub-section (1), pursuant to non-compliance with any direction issued by the Board under section 11B, shall have precedence over any other claim against such person." 186. Further, Section 28A(1) reads as follows: "28A. Recovery of amounts.-(1) If a person fails to pay the penalty imposed under this Act or fails to comply with any direction of the Board for refund of monies or fails to comply with a direction of disgorgement order issued under section 11B or fails to pay any fees due to the Board, the Recovery Officer may draw up under his signature a statement in the specified form specifying the amount due from the person (such statement being hereafter in this Chapter referred to as certificate) and shall proceed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment Circle (supra) a three-judge Bench decision, authored by Hon'ble the Chief Justice of the High Court of Madras Sanjay Kishan Kaul (as His Lordship then was), also came to the same conclusion that was reached in the case of Commissioner of Sales Tax, Indore (supra). 190. A judgement by the Division Bench of the High Court of Gujarat in Kalupur Commercial Co-operative Bank Ltd. (supra), unlike The Indian Overseas Bank (supra) and Commissioner of Sales Tax (supra), specifically deals with the issue contended by the respondent nos. 1 and 2. It was argued by the learned counsel for the respondent nos. 1 and 2 that insofar as the petitioner bank has not initiated any action under RDB Act, 1993, Section 31B of the said Act shall have no operation. 191. In Kalupur Commercial Co-operative Bank Ltd. (supra), the High Court came to the conclusion that irrespective of the then petitioner bank taking action under the SARFAESI Act, 2002. Section 31B of the RDB Act, 1993 may still be in operation. The said conclusion was reached on the basis -firstly, because Section 31B of the RDB Act, 1993 is a substantive provision and the definition of "secured creditor" as per the RDB Act, 1993 Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation.- For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code." 195. Section 32 of the SEBI Act, 1992 reads as under: "32. Application of other laws not barred.-The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force." 196. This court is in agreement with the decisions of Commissioner of Sales Tax, Indore (supra), and The Indian Overseas Bank (supra), however, their ratios must be understood in the right perspective. The said two decisions deal with a conflict with taxing statutes, meaning thereby statutes not finding mention in Section 37 of the SARFAESI Act, 2002 or Section 34(2) of the RDB Act, 1993. 197. In the present case, however, the SEBI Act, 1992 has its express mention in Section 37 of the SARFAESI Act, 2002. The manner of interpreting a conflict between SARFAESI Act, 2002 or RDB Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Central Registry so as to create Central database of security interest on property rights; (ii) conferment of powers upon the Reserve Bank of India to regulate asset reconstruction companies in a changing business environment; (iii) exemption from stamp duty on assignment of loans by banks and financial institutions in favour of asset reconstruction companies; (iv) enabling noninstitutional investors to invest in security receipts; (v) debenture trustees as secured creditors; (vi) specific timeline for taking possession of secured assets; and (vii) priority to secured creditors in repayment of debts." [Emphasis supplied] 201. Furthermore, the notes on clauses related to Section 26E of the SARFAESI Act, 2002 inserted through the amending Act is as follows: "Clause 17 seeks to insert a new Chapter IVA in the principal Act relating to Registration by Secured Creditors and other creditors, consisting of sections 26B, 26C, 26D and 26E. Section 26B seeks to provide for extending the provision of registration to all lenders other than secured creditor for creation, modification or satisfaction of any security interest over any property of the borrower for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
