Secured creditor rights under SARFAESI prevail over regulator communications that cannot enlarge the scope of directions to restrain mortgage enforcement.

The securities regulator's direction-making power was read broadly enough to extend to banks associated with the securities market, even if the bank was not separately registered as an intermediary. The interim and confirmatory communications, however, were confined to the noticees and their assets as expressly stated and did not bar a secured creditor from enforcing a prior mortgage under SARFAESI. Sections 35 and 37 were harmonised to preserve the special statutory recovery regime, so the bank could proceed with auction. The impugned e-mails were treated as unauthorised communications that could not enlarge the underlying orders, and writ relief was maintainable against them.

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Issues: (i) Whether the securities regulator had power to issue directions to the bank notwithstanding that the bank was not separately registered with it; (ii) Whether the interim, confirmatory and subsequent communications restrained the secured creditor from enforcing its mortgage and proceeding under the SARFAESI Act, 2002; (iii) Whether the impugned e-mails were legally sustainable and whether the writ petition was barred by the availability of an alternate statutory remedy.

Issue (i): Whether the securities regulator had power to issue directions to the bank notwithstanding that the bank was not separately registered with it.

Analysis: The statutory scheme of the securities law was read to permit directions under the power to issue directions to persons referred to in Section 12 and to persons associated with the securities market, even if they are not registered as intermediaries. The power was held to extend to banks because the enactment specifically authorises calling for information from banks and issuing protective directions in aid of investigation and investor protection. The construction adopted was based on the plain wording of the provision and the breadth of the regulatory power.

Conclusion: The regulator had power to direct the bank.

Issue (ii): Whether the interim, confirmatory and subsequent communications restrained the secured creditor from enforcing its mortgage and proceeding under the SARFAESI Act, 2002.

Analysis: The directions restraining alienation were held to apply to the noticees and their assets in the manner expressly stated, but not so as to prohibit the bank from enforcing a pre-existing secured interest against the mortgaged property. The SARFAESI regime was treated as a special, self-contained mechanism for realisation of secured debt. Sections 35 and 37 were harmonised by holding that the secured creditor's statutory enforcement rights were not cut down by the securities regulator's directions, and that the recovery framework under SARFAESI operated as a carve out unaffected by those directions.

Conclusion: The orders did not prevent the bank from auctioning the mortgaged property under the SARFAESI Act, 2002.

Issue (iii): Whether the impugned e-mails were legally sustainable and whether the writ petition was barred by the availability of an alternate statutory remedy.

Analysis: The e-mails were treated as communicative instructions expanding the scope of the underlying orders beyond their terms. They were held to be neither quasi-judicial orders nor legally competent directions because they lacked jurisdictional foundation and wrongly asserted that the securities orders bound the bank from proceeding with the auction. On the maintainability objection, it was held that the bank was not aggrieved by the securities orders themselves, so the appellate remedy under the securities law was not an effective bar in the facts of the case. The writ was maintainable against the impugned communications that directly interfered with the bank's secured enforcement action.

Conclusion: The impugned e-mails were erroneous and wholly without jurisdiction, and the writ petition was maintainable.

Final Conclusion: The bank's secured enforcement rights were preserved, the regulator's communications could not enlarge the scope of the underlying orders, and the proceedings under the SARFAESI Act, 2002 were allowed to continue unaffected.

Ratio Decidendi: A securities regulator's direction under its investor-protection powers cannot be construed to restrain a secured creditor from enforcing a mortgage under SARFAESI unless the direction expressly and validly covers that asset, and a broad non-obstante clause in SARFAESI preserves the secured creditor's enforcement rights against inconsistent interference.

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