TMI Blog2023 (7) TMI 1128X X X X Extracts X X X X X X X X Extracts X X X X ..... ass of persons referred to in Section 12 irrespective of their registration with SEBI. 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.This court is therefore of the opinion that Section 11B(1)(iii)(a) of the SEBI Act, 1992 allows for directions to be given to persons or class of persons referred to in Section 12 of the SEBI Act, 1992 irrespective of the persons or class of persons being registered with SEBI. 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. 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. The orders passed by Whole Time Member of SEBI are applicable to the petitioner bank, they however do not prevent the petitioner bank from auction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 1992 ). 5. Respondent nos. 3 and 4 i.e., Mr. Deepak Goel and Mrs. Ruchika Goel, respectively, are the borrowers of the petitioner bank and had availed a home loan facility from the petitioner bank amounting to Rs. 6,03,99,231/- vide facility agreement dated 22.09.2017, mortgaging the property in question. The home loan in question was disbursed by the petitioner bank to respondent nos. 3 and 4 from its Green Park Branch, New Delhi. 6. On 22.09.2017 a Deed of Guarantee was executed by respondent nos. 3 and 4 and they had created security interest in respect of the property in favour of the petitioner bank, while depositing with the petitioner bank the original title document of the said mortgaged property including the Sale Deed dated 22.04.2013. The petitioner bank had duly registered the said mortgaged property with the Central Registry of Securitisation Assets Reconstruction and Security Interest of India (hereinafter CERSAI ) on 17.10.2017. 7. It appears that in the year 2017, SEBI started an inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 debits are made in the demat accounts, held jointly or severally, of the aforesaid entitles and persons except for the purpose mentioned In sub-para (e) after confirmation from the concerned stock exchange in this regard. g. Registrar and transfer Agents are also directed to ensure that the securities (including mutual fund units) in physical form, held jointly or severally, by the aforesaid entitles and persons are not transferred/redeemed 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 to take any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 constrained to sell the mortgaged property to realise the outstanding dues. The petitioner bank thereafter, on 16.10.2020 issued a notice published in two local newspapers cautioning the public not to deal with the subject property and that dealing with the same would be subject to the charge of the petitioner bank. On 19.12.2020, the petitioner bank published the notice for auction sale of the mortgaged property at a reserved price of Rs. 8,67,20,000/-. On the same day i.e., 19.12.2020 the petitioner bank sent a sale notice to respondent nos. 3 and 4 and the guarantor along with a vacation notice to vacate the moveable articles in/on the property within 15 days. 16. It is thereafter, on 29.01.2021 one of the impugned e-mails was received by the petitioner bank from respondent no. 1, informing the petitioner bank that vide orders dated 29.05.2018 and 14.12.2018 passed by the Whole Time Member of SEBI (hereinafter said Orders ), respondent nos. 3 and 4 were restra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 29.05.2018 and 14.12.2018 partake the character of orders in rem and bind all constituents dealing with the broker or his assets/liabilities till the completion of investigation/forensic audit and thereafter, the petitioner bank has filed the instant writ petition. However, during the pendency of the instant writ petition, the final order dated 09.06.2022 has been passed by SEBI under Section 11(4), 11B and 11D of the SEBI Act, 1992. 20. Mr. Sanjiv Sen, learned senior counsel appearing on behalf of the petitioner, assisted by Mr. Sumit Goel, Ms. Sreeparna Basak, Ms. Anjali Singh and Mr. Jayant Bajaj, submitted that the right of a secured creditor to realise secured debt has priority over all other debts. After placing specific reliance on the non-obstante clause of Section 26E of the SARFAESI Act, 2002 read with Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 (hereinafter RDB Act, 1993 ), it was argued by the learned senior counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... janrai 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 Durga Prasad Nath Shahi Deo Ors. MANU/BH/021111948, Pegasus Assets Reconstruction Private Limited v. M/s Haryana Concast Limited and Anr. (2016) 4 SCC 47, Authorized Officer, State Bank of Travancore Anr. v. Mathew K.C. (2018) 3 SCC 85., Union of India v. SICOM Ltd. Anr. (2009) 2 SCC 121., Jalgaon Janta Sahakari Bank Ltd. Anr. v. Joint Commissioner W.P.(C) 2935 of 2018., Deputy Director Directorate of Enforcement Delhi v. Axis Bank Ors 2019 SCC OnLine Del 7854, Authorized Officer, Indian Bank v. D. Visalakshi Anr (2019) 20 SCC 47 and Kotak Mahindra Bank Limited v. Girnar Corrugators Pvt. Ltd. Ors 2023 SCC OnLime SC 15. 26. Learned senior counsel Mr. Arunabh Choudhury assisted by Mr. Ashish Agarwal, Ms. Astha Kaushal and Mr. Aniruddha Mahadevan appearing on behalf of respondent nos. 1 and 2 while relying on his counter affidavit stated that the three orders viz. interim order, confirmatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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 the SEBI Act, 1992 would become redundant if, in exercise of the powers conferred by the statute, SEBI could not be presumed to have powers to direct banks from preventing the alienation of property. No regulation and investigation could take place if such powers are not imputed to SEBI. The power to direct banks to prevent alienation of money from the bank accounts or in other words, prevent the debits from the bank accounts, is incidental and necessary for the regulatory framework to operate in the manner in which the legislature so envisioned it. It is, therefore, clear that SEBI has a power to issue directions to banks in general, and to the petitioner bank in particular. 34. Precisely, learned counsel tried to establish that the Parliament s intent is clear under Section 37 of the SARFAESI Act, 2002 to mean that the provisions of the SEBI Act, 1992 will not be covered by the non-ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) 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. Securities Exchange Board of India Writ Petition (c) No. 13322/2022, Order dated 15.09.2022, Delhi High Court. 38. Learned senior counsel appearing on behalf of the petitioner in response to the submissions with respect to the maintainability of the instant writ petition submitted that the petitioner bank is not aggrieved by the said Orders as they do not apply to the petitioner bank. He also submitted that the petitioner is aggrieved by the impugned emails/communications dated 29.01.2021 (P-43) and 18.03.2021 (P44), by which SEBI directed the petitioner bank to comply with the orders dated 29.05.2018 and 14.12.2018 and not to proceed against the mortgaged property under Section 13 of the SARFAESI Act, 2002 without prior permission of the SEBI. 39. According to him, the impugned e-mails are without jurisdiction and the petitioner is no way concerned with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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: 118. SEBI, I have already indicated, has a duty under Section 11A of the SEBI Act to protect the interests of investors in securities either listed or which are required to be listed under the law or intended to be listed. Under Section 11B, SEBI has the power to issue appropriate directions in the interests of investors in securities and securities market to any person who is associated with securities market. [Emphasis supplied] 46. Hon ble the Chief Justice of India J.S. Khehar, in their separate concurring opinion made material observations having bearing on the present matter. They are liberally reproduced as under: 221. [T]he amendment of the SEBI Act in 2002 is of utmost relevance. The relevant part of the statement of objects and reasons of the amendment of the SEBI Act in 2002 is being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 or inquiry by the Board; (ii) passing an order for reasons to be recorded in writing, in the interest of investors or securities market, either pending investigation or enquiry or on completion of such investigation or inquiry for taking any of the following measures, namely, to- (A) suspend the trading of any security in a recognized stock exchange; (B) restrain persons from accessing the securities market and prohibit any person associated with securities market to buy, sell or deal in securities; (C) suspend any office-bearer of any stock exchange or selfregulatory organization from holding such position; (D) impound and retain the proceeds or securities in respect of any transaction which is under investigation; (E) attach, after passing of an order on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 expression in the interest of securities market or protection of investors as and . The Board, therefore, when it decides to exercise its power under Regulation 44 and issues directions under the said Regulation has to keep the two facets in mind, namely, (i) interest of the securities market; and (ii) protection of interest of the investors [Emphasis supplied] 48. After the decision of the Hon ble Supreme Court in Sahara India Real Estate Corporation Limited (supra), the SEBI Act, 1992 was again amended through the Securities Laws (Amendment) Act, 2014. The material sections of the amending Act are reproduced as under: 2. In section 11 of the Securities and Exchange Board of India Act, 1992 (hereafter in this Chapter referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 securities markets; (b) registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other intermediaries who may be associated with securities markets in any manner; (ba) registering and regulating the working of the depositories, participants, custodians of securities, foreign institutional investors, credit rating agencies and such other intermediaries as the Board may, by notification, specify in this behalf; (c) registering and regulating the working of venture capital funds and collective in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit, in respect of the following matters, namely: (i) the discovery and production of books of account and other documents, at such place and such time as may be specified by the Board; (ii) summoning and enforcing the attendance of persons and examining them on oath; (iii) inspection of any books, registers and other documents of any person referred to in section 12, at any place; (iv) inspection of any book, or register, or other document or record of the company referred to in sub-sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, levy penalty under sections 15A, 15B, 15C, 15D, 15E, 15EA, 15EB, 15F, 15G, 15H, 15HA and 15HB after holding an inquiry in the prescribed manner. (5) The amount disgorged, pursuant to a direction issued, under section 11B of this Act or section 12A of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or section 19 of the Depositories Act, 1996 (22 of 1996), or under a settlement made under section 15JB or section 23JA of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or section 19-IA of the Depositories Act, 1996 (22 of 1996) as the case may be, shall be credited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty; (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 be passed immediately, the Board shall give a reasonable opportunity of hearing to the persons concerned after passing the direction, without any undue delay. [Emphasis supplied] 52. An intermediary is then defined under Regulation 2(1)(g) of the Regulations, 2008 in the following words: (g) intermediary means a person mentioned in clauses (b) and (ba) of sub-section (2) of section 11 and sub-section (1) and (1A) of section 12 of the Act and includes an asset management company in relation to the Securities and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate 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 included in the Second Schedule of the Reserve Bank of India Act, 1934 (2 of 1934) 55. The Second Schedule of the Reserve Bank of India Act, 1934 then provides for ICICI Bank Ltd. i.e., the petitioner bank. 56. The question that then arises before this court is whether the persons or class of persons referred to in Section 12 can be made subject to the powers under Section 11B prior to the registration as provided for under Section 12 of the SEBI Act, 1992. In o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 are clear, plain or unambiguous, i.e., they are reasonably susceptible to only one meaning, the courts are bound to give effect to that meaning irrespective of consequences [Nelson Motis v UOI, AIR 1992 SC 1981, p 1984; Gurudevdata VKSSS Maryadit v State of Maharashtra, AIR 2001 SC 1980, p 1991; State of Jharkhand v Govind Singh, AIR 2005 SC 294, p 296; Nathi Devi v Radha Devi Gupta, AIR 2005 SC 648, p 659.] . The rule stated by Tindal C.J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) 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 unambiguous, we are bound to construe them in their ordinary sense, even though it does lead to an absurdity or manifest injustice. Words may be modified or varied where their import is doubtful or obscure, but we assume the functions of legislators when we depart from the ordinary meaning of the precise words used, merely because we see, or fancy we see, an absurdity or manifest injust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 view of the above, I, in exercise of powers conferred upon me by virtue of section 19 read with sections 11 (1), 11 (4), 11B and 11D of the SEBI Act, 1992, Regulation 35 of Securities And Exchange Board of India (Intermediaries) Regulations, 2008, by way of this ex parte - ad- interim order, hereby issue the following directions: a. F6 Finserve Private Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcept 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 and Transfer Agents and the Depositories to ensure that the directions given above are strictly complied with. 77. The material part of the confirmatory order dated 14.12.2018 passed by Whole Time Member of SEBI, reads as under: Order: 26. Considering the above, I, in exercise of the powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 expressions used and not defined in this Act but defined in the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Depositories Act, 1996 (22 of 1996) shall have the meanings respectively assigned to them in that Act. 80. The definition of a 'depository' is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent 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 the preceding directions. 90. Even if paragraph no. 30 is to apply to the petitioner bank, it would only amount to a direction to ensure compliance. The petitioner bank, insofar as its compliance is concerned, is only asked to do or forebear from doing what h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk, 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 the SEBI Act, 1992 and Regulation 35 of the Regulations, 2008 operate in rem or in personam. 101. This court must now consider the issue relating to the impugned e-mails, including the nature of the impugned emails. 102. In National Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 transactions with the said broker or its clients. In view of the above, the steps taken by ICICI bank for sale of the property when a proper Prohibitory Order by SEBI is in place, without seekin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 limitations on this discretionary relief, and they must be of a nature, that would disallow Article 226 being treated as an alternative remedy. Conversely then, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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, Qua Warranto and Certiorari for the enforcement of any of the Fundamental Rights contained in Part III of the Constitution but also for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed 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 that the high courts (bearing in mind the facts of each particular case) have a discretion whether to entert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 convenience and a High Court may, in an appropriate circumstance, choose to entertain a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 bank cannot be said to be aggrieved by the said Orders, as they do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 court, whether SEBI in exercise of powers conferred un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 non-obstante clause, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the effect of the non-obstante provision of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a general law like the Contract Act. Since section 35 overrides other 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 q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s this court to construe the SEBI Act, 1992 as overriding as also preventing or thwarting 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion containing a broadly worded non-obstante clause inserted through the means of an amendment, and 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 pronoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STATEMENT OF OBJECTS AND REASONS The financial sector has been one of the key drivers in India's efforts to achieve success in rapidly 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 posses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in GP Singh s Principles of Statutory Interpretation 15th Ed., p. 111: It has already been seen that a statute must be read as a whole and one provision of the 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... schief. It is presumed therefore that Parliament intends the court, in construing the enactment, to endeavour to apply the remedy provided by it in such a way as to suppress that mischief. Comment The reason for passing 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 failur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37. Application of other laws not barred. The provisions of this Act or the rules made thereunder shall be 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 Securities and Exchange Board of India 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to allow the plain meaning of the theres to be overridden purely by reason of a heading. [Emphasis supplied] 181. Similarly, GP Singh s Principles of Statutory Interpretation, 15th Ed., pp. 129-130 notes as under: The view is now settled that the Headings or Titles prefixed to sections or group of sections can be referred to in 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve analysis, it can be concluded that proceedings under the SARFAESI Act, 2002 are to be treated as a carve out, and therefore remain unaffected by, orders under the SEBI Act, 1992. 184. This court shall now delve into the aspect of the dispute related to the interpretation of Section 26E of the SARFAESI Act, 2002, Section 31B of the RDB Act, 1993 and Section 28A(3) of the SEBI Act, 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment Act, 2016 (hereinafter said Amendment ), doubts regarding primacy between a secured debt and all other debts and government dues such as revenue, taxes, cesses and rates due to Central Government, State Government and local authorities, has been settled. The conclusion then reached by the court is that priority must be given to the secured debt. 189. Further, in Assistant Commissioner (CT), Anna Salai-III Assessment 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 Kalu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of that Code. 194. Sections 26E of the SARFAESI Act, 2002 read as under: 26E. Priority to secured creditors- Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority. Explanation .- 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 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tamp Act, 1899 and the Depositories Act, 1996. 2. The amendments in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 are proposed to suit changing credit landscape and augment ease of doing business which, inter alia, include (i) registration of creation, modification and satisfaction of security interest by all secured creditors and provision for integration of registration systems under different laws relating to property rights with the 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. Furthermo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment ease of doing business. 204. Section 26E of the SARFAESI Act, 2002 may not be squarely applicable in the present factual scenario, however it evinces the continued intention of the legislature of prioritisation the secured debts owed to banks. 205. From the analysis above, it may be concluded that an interpretation of Section 35 and Section 37 of the SARFAESI Act, 2002 would reveal that the proceedings under the SARFAESI Act, 2002 are to be treated as a carve out to, and remain unaffected by, the orders passed under the SEBI Act, 1992. 206. On the facts of the present case, the said Orders do not prevent the petitioner bank from proceeding further under the SARFAESI Act, 2002 to auction its mortgaged property. 207. The conclusions reached by the court are summarized as under: a. SEBI is found to be vested with the requisite legal power to direct banks. b. The orders dated 29.05.2018 and 14.12.2018 passed by Whole Time Member of SEBI are applicable to the petitioner bank, they however do not prevent the petitioner bank from auctioning the mortgaged property being Villa No. TPV-G-GV-07, The Palm Springs, Village Wazirabad, Sector 54, Gurgaon 122002, under t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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