TaxTMI 
TaxTMI 
2023 (7) TMI 1128
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....Act, 2002 (hereinafter 'SARFAESI Act, 2002') 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 Boa....
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....rectly, or being associated with the securities market in any manner 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 supervisio....
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....count in question was classified by the petitioner bank as a Non-Performing Asset on 30.09.2019. 13. The petitioner bank thereafter, 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 ....
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....n favor of the Bank for securing due repayment of the dues payable under the Home Loan facility. The Bank therefore state that It has the first and exclusive 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 o....
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....earned senior counsel appearing on behalf of the petitioner has taken this court through various provisions of the SARFAESI Act, 2002, the SEBI Act, 1992 and the RDB Act, 1993. He 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, Punja....
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....hat will have no application. However, in the instant case, according to him, there is no inconsistency between the provisions of the SARFAESI Act, 2002 and the SEBI Act, 1992 and both Acts 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 theref....
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....ted Colliries Limited [1942] A.C. 601.. 36. Learned senior counsel appearing on behalf of respondent nos. 1 and 2 in addition to his submissions on the merits of the case has also raised a preliminary 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 ....
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....o decide upon the issue of maintainability of the present petition, there are certain ancillary and incidental issues that need to be decided. These relate to the powers vested with SEBI under the SEBI Act, 1992, 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 exp....
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....t present, Under Section 209A of the Companies Act, 1956, the SEBI can conduct inspection of listed companies only for violations of the provisions contained in sections referred to in Section 55A of that Act but it cannot conduct inspection of any listed public company 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 Chairma....
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....ing such violation; (c) prohibiting manipulative and deceptive devices, insider trading, fraudulent and manipulative trade practices, market manipulation and substantial acquisition of securities and control; (d) crediting sums realized by way of penalties to the Consolidated Fund of India; ..." [Emphasis supplied] 47. In Sunil Krishnan Khaitan (supra), the Hon'ble Supreme 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....
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....with the prior approval of the Central Government;''; (ii) after sub-section (4), the following sub-section shall be inserted, namely:- ''(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 or section 19 of the Depositories Act, 1996, as the case may be, shall be credited to the Investor Protection and Education Fund established by the Board and such amount shall be utilised 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....
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....hether in India or outside India, having functions similar to those of the Board, in the matters relating to the prevention or detection of violations in respect of securities laws, subject to the provisions of other laws for the time being in force in this regard: Provided that the Board, for the purpose of furnishing any information to any authority outside India, may enter into an arrangement or agreement or understanding with such authority with the prior approval of the Central Government; (j) performing such functions and exercising such powers under the provisions of the Securities Contracts (Regulation) 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....
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.... with the securities market in any manner involved in violation of any of the provisions of this Act, or the rules or the regulations made thereunder: Provided that the Board shall, within ninety days of the said attachment, obtain confirmation of the said attachment from the Special Court, established under section 26A, having jurisdiction and on such confirmation, such attachment shall continue during the pendency of the aforesaid proceedings and on conclusion of the said proceedings, the provisions of section 28A shall apply: Provided further that only property, bank account or accounts or any transaction entered therein, so far as if related to the proceeds actually involved in violation of any of the provisions of this Act, 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....
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....ections,- (a) to any person or class of persons referred to in section 12, or associated with the securities market; or (b) to any company in respect of matters specified in section 11A, as may be appropriate in the interests of investors in securities and the securities market." [Emphasis supplied] 51. Similarly, Regulation 35 of the Regulations, 2008 accords powers to SEBI to issue directions in order to secure the interest of investors. It reads as under: "35. Without prejudice to any order under the securities laws and the directions, guidelines and circulars as may be issued thereunder including an order under Chapter V of these regulations the Board may in the interest of the securities market, in the interest of the investors or for the purpose of securing the proper management of any intermediary, 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 pers....
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....itions of a certificate of registration obtained from the Board in accordance with the made under this Act: Provided that a person buying or selling securities or otherwise dealing with the securities market as a stock broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who may be associated with securities market immediately before the establishment of the Board for which no registration certificate was necessary prior to such establishment, may continue to do so for a period of three months from such establishment or, if he has made an application for such registration within the said period of three months, till the disposal of such application: Provided further that any certificate of registration, obtained immediately before the commencement of 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 ....
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.... 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 Exchange Board of India (Mutual Funds) Regulations, 1996, a clearing member of a clearing corporation or clearing house foreign portfolio investors and a trading member of a derivative segment or currency derivatives segment of a stock exchange but does not include foreign venture capital investor, mutual fund, collective investment scheme and venture capital fund;" [Emphasis supplied] 59. It can thus be seen that the SEBI Act, 1992 and the Regulations framed under it, employ references to the entities listed under Section 12 in two ways, first is by referring to them post the registration, and the second is a reference to the persons or class of persons in simpliciter i.e., without the qualification of registration under Section 12 of the SEBI Act, 1992. 60. It is also of importance to consider that the exhaustive 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, 19....
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.... insisted that in construing enacted words we are not concerned with the policy involved or with the results, injurious or otherwise, which may follow from giving effect to the language used". [Emperor v Benoarilal Sarma, AIR 1945 PC 48, p 53.] As said by Gajendragadkar J: If the words used are capable of one construction only then it would not be open to the courts to adopt any other hypothetical construction on the ground that such hypothetical construction is more consistent with the alleged object and policy of the Act."[ Kanailal Sur v Paramnidhi Sadhu Khan, AIR 1957 SC 907, p 910 : (1958) SCR 360] 64. On similar footing, Craies on Legislation, 9th Ed., describes construction according to plain meaning as the cardinal rule. On page 611, paragraph no. 17.1.1 the rule is described in the following words: "The traditional rule The cardinal rule for the construction of legislation is that it should be construed according to the intention expressed in the language used. So the function of the court is to interpret legislation "according to the intent of them that made it"[4 Co. Isnt. 330.] and that intent is to be deduced from the language used.[....
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....ities mentioned under Regulation 35 itself, including intermediaries and persons associated with the securities market. 69. Section 11B of the SEBI Act, 1992, explicitly provides that directions can be issued to any person or classes of persons referred to in Section 12 or persons associated with the securities market. 70. Indeed the power to direct a bank is necessary for the proper functioning of SEBI. Such powers are incidental to ensuring that the purpose of the investigation or enquiry conducted by SEBI actually fructifies. But for this power, an individual may, without more, dissipate its assets. 71. The person or entity who acquires or collects assets through questionable means, may, as soon as they are informed of investigations or enquiries being initiated against them, liquidate and transfer their assets in a form and place where they are beyond the reach of SEBI. It would be unwise to construct the provisions of the SEBI Act, 1992 and the Regulations framed thereunder, in a manner that the aforesaid effect is reached. 72. However, it is worthwhile to note that the powers so conferred upon SEBI under the SEBI Act, 1992 need to be exercised in a manner such tha....
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....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 entities 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 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....
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....ade from the accounts of the Noticees. I, therefore, direct as under: a. Since the claim value is higher at NSE, NSE Defaulters Committee shall, as expeditiously as possible, open and operate a dedicated demat account where all the securities lying in the demat account of F6 Finserve shall be transferred. b. The NSE Defaulters Committee shall open and operate a dedicated interest bearing bank account with a Nationalized Bank where all the funds lying in various bank accounts held in the name of F6 Finserve, Mr. Pankaj Goel and Ms. Meenu Goel, shall be transferred. c. The MXY's Defaulters Committee shall open and operate a dedicated interest bearing bank account with a Nationalized Bank where all the funds lying in various bank accounts held in the name of F6 Commodities shall be transferred. 28. This order is without prejudice to any enforcement action that SEBI may deem necessary against the Noticees pursuant to the investigation in the matter. This order shall continue to be in force till further directions. ..." 78. It may be seen that there are three species of directions that are issued by SEBI in its order dated 29.05.2018, whic....
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....eneral direction is given that the assets of the entities are to be utilized only for the purpose of payment and/or delivery of securities to the clients/investors under the supervision of the concerned stock exchanges. 83. Similarly, paragraph no. 27(h) of the order dated 29.05.2018 gives an explicit instruction to banks to ensure that no debit is made from the bank accounts of respondent nos. 3 and 4, save and except cases for the payment of money to clients/investors with a written confirmation of the stock exchange. 84. It is certainly the case that the petitioner bank falls under the category of a "bank", therefore directions contained in paragraph no. 27(e) read with paragraph no. 30; and in paragraph no. 27(h) do apply to the petitioner bank. 85. However, it is of significance to note the true import of the directions. A careful scrutiny of the directions contained in paragraph nos. 27(e) and (h), and paragraph no. 30, reveal that they do not prevent the petitioner bank from alienating the assets of respondent no. 3 and 4, including the mortgaged property. 86. The direction contained in paragraph no. 27(e) puts a restriction upon the assets of the "entities" from....
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....perate a dedicated demat account where all the securities lying in the demat account of F6 Finserve shall be transferred. 93. It further directs the NSE Defaulters Committee to open and operate a dedicated interest bearing bank account with a Nationalized Bank where all the funds lying in the various bank accounts held in the name of F6 Finserve, Mr. Pankaj Goel and Ms. Meenu Goel shall be transferred. 94. Similarly, MCX's Defaulter's committee was directed to open and operate a dedicated demat account where all the securities lying in the demat accounts of F6 Commodities shall be transferred, and also open a dedicated interest bearing bank account with a Nationalized Bank, in which all the funds lying in the various bank accounts held in the name of F6 Commodities shall be transferred. 95. It is, therefore, clear that the confirmatory order dated 29.05.2018, also does not contain a direction that prevents the petitioner bank from auctioning the mortgaged property. 96. Lastly, the final order dated 09.06.2022 brought on record by respondent nos. 1 and 2 also does not contain a specific direction that prevents the petitioner bank from auctioning the mortgaged property. ....
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....of an "order" was expounded upon. It was ruled that an order is primarily a decision which has the effect of a command, whether called by such name or not, and is distinguishable from an advice or request, by the nature of the consequence that may flow from the non-implementation of the same. Furthermore, it was held that in order to ascertain whether a communication or decision amounts to an order, 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. 104. The material part of the e-mail dated 29.01.2021 reads as under: "3. It has been brought to the notice of SEBI that ICICI bank vide public notice dated December 19, 2020 ICICI bank (through its branch office Plot no. 23, 3rd Floor, Shahi Tower, new Rohtak Road, Karolbagh, new delhi-110005) is conducting online auction of the Property which is held in the name of Mr. Deepak Goel and Mrs. Ruchika Goel situated at Villa No. TV-G-GV-07, The palm springs, Village Wazirabad, Sector 54, Gurgaon-1220002 (Haryana) 7136.93 sq.ft (enclosed) 4. It is informed that, as per para....
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....judicially when he had sent the impugned e-mails. 107. The impugned e-mails are thus communicative in nature. 108. The e-mail dated 29.01.2021 informs the petitioner bank of the existence of the said Orders, cites paragraph no. 27(d) of the order dated 29.05.2018 and advises the petitioner bank to comply with the same. The e-mail dated 18.03.2021 declares that the said Orders operate in rem, they are applicable to the petitioner bank, the act of the petitioner bank wanting to auction the mortgaged property is "inappropriate", and that the petitioner bank is to comply with the directions in the said Orders. 109. Though not properly framed, the emails, in effect, communicate that the said Orders contain directions, including the direction in paragraph no. 27(d) of the order dated 29.05.2018, which is applicable to the petitioner bank as the said Orders operate in rem, and the petitioner bank, is therefore, prevented from auctioning the mortgaged property. This court believes this to be faulty reasoning. 110. As had been explained in the preceding paragraphs, the order dated 29.05.2018, in exclusion to the direction in paragraph no. 27(e), contains specific directions to s....
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....writ petition under Article 226 of the Constitution of India against an assessment order passed by the Assessing Officer under the Maharashtra Value Added Tax Act, 2002 and the Central Sales Tax Act, 1956, bypassing the statutory remedies. 118. The Hon'ble Supreme Court in Gurdev Singh (supra), while relying upon Prof. Wade on Administrative Law, 6th Ed., page no. 352, stated as under: "9. Apropos to the principle. Prof. Wade states: "the principle must be equally true where the 'brand' of invalidity" is plainly visible; for there also the order can effectively be resisted in law only by obtaining the decision of the court. Prof Wade sums up these principles: "The truth of the matter is that the court will invalidate an order only if the right remedy is sought by the right person in the right proceedings and circumstances. The order may be hypothetically a nullity, but the court may refuse to quash it because of the plaintiff's lack of standing, because he does not deserve a discretionary remedy, because he has waived his rights, or for some other legal reason. In any such case the 'void' order remains effective and is in reality, valid. It follows that an orde....
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....lly without jurisdiction or the vires of an Act is challenged. ... 20. Much water has since flown beneath the bridge, but there has been no corrosive effect on these decisions which though old, continue to hold the field with the result that law as to the jurisdiction of the High Court in entertaining a Writ Petition under Article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the Writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation." [Emphasis supplied] 122. In a recent pronouncement of the Hon'ble Supreme Court in the case of Godrej Sara Lee Ltd. v. Excise & Taxation Officer 2023 SCC OnLine SC 95, while elaborating upon the distinction between maintainability and entertainability of a petition, the Hon'ble Supreme Court clarified that the doctrine of alternate remedy belongs to the sphere of entertainability. There is thus, not an absolute bar that is placed upon the powers of the High Court. 123. The Hon'ble Supreme Court further gave a finding that in cases where the dispute is purely l....
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....absolute bar to the "maintainability" of a writ petition and that the rule, which requires a party to pursue the alternative remedy provided by a statute, is a rule of policy, convenience and discretion rather than a rule of law. Though elementary, it needs to be restated that "entertainability" and "maintainability" of a writ petition are distinct concepts. The fine but real distinction between the two ought not to be lost sight of. The objection as to "maintainability" goes to the root of the matter and if such objection were found to be of substance, the courts would be rendered incapable of even receiving the lis for adjudication. On the other hand, the question of "entertainability" is entirely within the realm of discretion of the high courts, writ remedy being discretionary. A writ petition despite being maintainable may not be entertained by a high court for very many reasons or relief could even be refused to the petitioner, despite setting up a sound legal point, if grant of the claimed relief would not further public interest. Hence, dismissal of a writ petition by a high court on the ground that the petitioner has not availed the alternative remedy without, however, exa....
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....ting officer under the Act. Under Section 15I, SEBI can appoint an officer not below the rank of a Division Chief to be an adjudicating officer to hold an inquiry, give a hearing to the person concerned and thereafter impose a penalty, all of which points to only quasi-judicial functions being exercised by such officers. 127. After having considered a catena of pronouncements by the Hon'ble Supreme Court, it was held that administrative orders such as circulars referable to Section 11(1) of the SEBI Act, 1992 are outside the appellate jurisdiction of the Tribunal. Paragraph no. 25 of the judgement is reproduced as under: "It may be stated that both Rules made Under Section 29 as well as Regulations made Under Section 30 have to be placed before Parliament Under Section 31 of the Act. It is clear on a conspectus of the authorities that it is orders referable to Sections 11(4), 11(b), 11(d), 12(3) and 15-I of the Act, being quasi-judicial orders, and quasi judicial orders made under the Rules and Regulations that are the subject matter of appeal Under Section 15T. Administrative orders such as circulars issued under the present case referable to Section 11(1) of the Act a....
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....ra) are of, therefore, no help to respondents nos. 1 and 2, as the said cases have application only in cases where there is, in fact, an alternative remedy that is available to a petitioner. The reliance of respondent nos. 1 and 2, on the approval of Prof. Wade's words in Gurdev Singh (supra) is correct, they are again reproduced hereunder: "The truth of the matter is that the court will invalidate an order only if the right remedy is sought by the right person in the right proceedings and circumstances..." 134. In the present circumstances, this court is of the opinion that the petitioner bank is the right person seeking the right remedy in the right proceedings. The judgments delivered by this court in Kuber Floritech Ltd (supra) and Balvir Singh (supra), are simply not applicable in the instant case as what was assailed in the abovementioned judgements were orders, moreover the court had found the concerned orders to be appealable under Section 15T of the SEBI Act, 1992. 135. Further, Raj Kumar Shivhare (supra), is inapplicable as the present case has a different factual matrix than the judgement cited. The petitioner bank has been successful in convincing this co....
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.... judgment recognised the differing aspects dealt with by the different statutes involved in the dispute, which is reproduced as under: "13. It is important at this stage to refer to the genesis of these three legislations. Each of them deals with different aspects of recovery of debts due to banks and financial institutions. Two of them refer to creditors' interests and how best to deal with recovery of outstanding loans and advances made by them on the one hand, whereas the Sick Industrial Companies (Special Provisions) Act, 1985, on the other hand, deals with certain debtors which are sick industrial companies (i.e. companies running industries named in the schedule to the Industries (Development and Regulation) Act, 1951) and whether such "debtors" having become "sick", are to be rehabilitated. The question, therefore, is whether the public interest in recovering debts due to banks and financial institutions is to give way to the public interest in rehabilitation of sick industrial companies, regard being had to the present economic scenario in the country, as reflected in Parliamentary Legislation." 142. After emphasising the purpose for which the SARFAESI Act, ....
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....ale or lease of the sick company's properties for the purpose, which may or may not be a part of the security executed by the sick company in favour of a bank or a financial institution on the one hand, and the provisions of the RDDB Act, which deal with recovery of debts due to banks or financial institutions, if necessary by enforcing the security charged with the bank or financial institution, on the other. 40. There is no doubt that both are special laws. SICA is a special law, which deals with the reconstruction of sick companies and matters incidental thereto, though it is general as regards other matters such as recovery of debts. The RDDB Act is also a special law, which deals with the recovery of money due to banks or financial institutions, through a special procedure, though it may be general as regards other matters such as the reconstruction of sick companies which it does not even specifically deal with. Thus, the purpose of the two laws is different. 41. Parliament must be deemed to have had knowledge of the earlier law i.e., SICA, enacted in 1985, while enacting the RDDB Act, 1993. It is with a view to prevent a clash of procedure, and the poss....
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....ons of this Act to override other laws.-The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." "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] 147. The important finding made by the Hon'ble Supreme Court in paragraph no.35 of Madras Petrochem Ltd. (supra) relating to the ambit and scope of the non-obstante clauses contained in the SARFAESI Act, 2002 and the RDB Act, 1993 reads as under: "35. Another interesting pointer to the same conclusion is the fact that Section 35 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is not made subject ....
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....6, the Securities and Exchange Board of India Act, 1992, the Recovery of Debts Due to Banks and Finances Institutions Act, 1993, or any other law for the time being in force..." [Emphasis supplied] 150. Recently, the Hon'ble Supreme Court in the case of Authorised Officer State Bank of India v. C. Natarajan & Anr. 2023 SCC OnLine SC 510, made significant findings relating to the interplay between Section 35 and Section 37 of the SARFAESI Act, 2002. The material portion of paragraph no. 23 of the said decision reads as under: "23. That apart, significantly, section 35 of the SARFAESI Act mandates that the provisions thereof would have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any other instrument having effect by virtue of any such law. At the same time, section 37 of the SARFAESI Act postulates that provisions thereof or the rules made thereunder shall be in addition to and not in derogation of the enumerated enactments or any other law for the time being in force. What is of importance is that the nonobstante clause in section 35 of the SARFAESI Act is not subject to section 37 thereof; ho....
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....endants of deceased persons by the Fatal Accidents Acts, 1846 to 1908" 153. On the interpretation of the above-mentioned provision, Lord Russel noted as follows: "It was sought to extract some special meaning from the dual phrase "shall be in addition to and not in derogation of." This, it was said, was not idly tautological, but intentionally cumulative; and the words "not in derogation of" involved a direction that there was to be no taking away or deduction from or diminution of the damages obtainable under the Fatal Accidents Acts. For myself I can see no sufficient ground for reading this subtle hidden meaning into the subsection. I agree with the Court of Appeal that the words "and not in derogation of" merely emphasise what has been already said, that the rights conferred by one Act are additional to the rights conferred by the other Acts, and are to that extent tautological." 154. If the aforesaid dicta is applied, then the rights conferred under the SARFAESI Act, 2002 are to be found in addition to the rights conferred under the SEBI Act, 1992. However, in Davies (supra), the two statutes with which their Lordships concerned themselves were intricately conne....
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....ult to state, as a matter of general proposition, that the cause of action that leads to proceedings under the SARFAESI Act, 2002 and one that triggers actions under the SEBI Act, 1992 are the same. However, it can be safely stated that the rights of action are quite distinct and independent. They may further be applicable on the same set of assets. The issue that then arises is that whereas under Davies (supra), the two distinct rights of actions, may be rarely, if at all that may be a possibility, come at variance with each other; under the present dispute, there is a serious possibility for the same. For example, if in the present case, there was a direction against the petitioner bank that they are not to act in manner such, that the assets of respondent nos. 3 and 4 get alienated, the standing order may act as an obstacle to the petitioner bank realising its debt by liquidating the mortgaged property. 158. In such a scenario the issue becomes whether priority must be given to the general order of SEBI or the proceedings under the SARFAESI Act, 2002. In light of the unbridled non-obstante clause contained in Section 35 of the SARFAESI Act, 2002; which is not made subject to ....
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....t, has no control in respect of sale of a secured asset by a secured creditor in exercise of powers available to such creditor under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Some of the observations made by this Court are interesting in that this Court has held that the Securitisation Act is a complete code in itself, and that earlier judgments rendered in the context of the State Financial Corporation Act, 1951 or the Recovery of Debts Due To Banks And Financial Institutions Act, 1993 cannot be held applicable to the Securitisation Act. Further, the very incorporation of certain provisions of the Companies Act in the Securitisation Act themselves harmonise the latter Act with the Companies Act in respect of workers debts Under Section 529A of the Companies Act..." [Emphasis supplied] 162. In addition to the cases relied upon by the learned senior counsel being considered on merits, the Hon'ble Supreme Court's ruling also provides that decisions relating to statutes other than the SARFAESI Act, 2002, do not have much persuasive value. 163. This court is, therefore, of the considered opinion that Section....
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....fests the intention of the Parliament to protect investors, and confers upon SEBI powers to regulate the securities market. In the process of regulating, SEBI can issue directions to, inter alia, persons, who are found conducting themselves or their business, contrary to the interest of the market. 168. As is in the present case, the action of the petitioner bank is wholly unconnected with the subject-matter of the said Orders. The petitioner bank is attempting to realise its secured asset, which is the mortgage made in favour of the petitioner bank, for the loan taken by respondent nos. 3 and 4. The mortgaged property, is neither a security in the context of the securities market nor is associated with such a security, and is also not specifically governed by the SEBI Act, 1992. There is, therefore, a functional aspect that needs to be considered in the present issue. SEBI and the said Orders function in a field different from the field in which the petitioner bank has taken their actions under the SARFAESI Act, 2002. 169. The scheme of the statutes would reveal that in the facts and circumstances similar to the present case, a carve can be made to allow banks to realise the....
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.... reduces one of the provisions to a "useless lumber" or "dead letter" is not harmonious construction. To harmonise is not to destroy. A familiar approach in all such cases is to find out which of the two apparently conflicting provisions is more general and which is more specific and to construe the more general one as to exclude the more specific. The question as to the relative nature of the provisions general or special has to be determined with reference to the area and extent of their application either generally or specially in particular situations." [Emphasis supplied] 171. Indeed the intention of the legislature would get compromised if banks are disallowed from realising their security that they had registered following the statutory scheme. In this context Craies on Legislation, 9th Ed., at pp. 670-671 notes as under: "The rule requiring that verba ita sunt intelligenda ut res magis valeat quam pereat requires that where possible the intention fo the legislature is not to to be treated as vain or left to operate in the air. The result is that if two constructions of a provision are possible on its face, and one would clearly advance the legislative purpose....
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....ed defective, Parliament would not need or want to change it. That defect is the 'mischief' to which the Act is directed." 174. In the Indian context, the said rule has been adopted ever since the case of Bengal Immunity Co v. State of Bihar AIR 1955 SC 661. The mischief sought to be remedied has been adequately captured by the statement of objects and reasons of the SARFAESI Act, 2002. It is reemphasised below: "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] 175. Thus the mischief sought to be cured was the lack of a statutory mechanism that provided, and further allowed, banks to realise their security interests with minimum interference from courts. The SARFAE....
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.... Comment Headings are as much part of an Act as any other component and may be considered in construing any provision of it, despite dicta to the contrary in some older cases (discussed below). As discussed in CHAPTER 2, a variety of headings is used in Acts. Each section, Schedule, Chapter and Part has its own heading and italic headings are often placed above a group of sections or one or more paragraphs of a Schedule. Prior to 2001, sections had sidenotes or marginal notes placed in the margin, rather than a heading placed above, but the word heading' is used to cover them as well.* The correct approach to the use of headings in interpretation was sum-marised by the House of Lords in R v. Montila: "The question then is whether headings and sidenotes, although unamendable, can be considered in construing a provision in an Act of Parliament. Account must, of course, be taken of the fact that these components were included in the Bill not for debate but for ease of reference. This indicates that less weight can be attached to them than to the parts of the Act that are open for consideration and debate in Parliament. But it is another matter....
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....pose of construing the provision when the words used in the provision are clear and unambiguous; nor can they be used for cutting down the plain meaning of the words in the provision. Only in the case of ambiguity or doubt the heading or sub-heading may be referred to as an aid in construing the provision but even in such a case it could not be used for cutting down the wide application of the clear words used in the provision."[Frick India Ltd. v. UOI, AIR 1990 SC 689.] After referring to the conflicting opinions relating to the use of headings or titles prefixed to sections or group of sections, Lahoti J expressed himself as follows: It is permissible to assign the heading or title of a section, a limited role to play in the construction of statutes. They may be taken as very broad and general indicators of the nature of the subject-matter dealt with thereunder. The heading or title may also be taken as a condensed name assigned to indicate collectively the characteristics of the subject matter dealt with by the enactment underneath; though the name would always be brief having its own limitations. In case of conflict between the plain language of the provision ....
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.... of the person's movable property; (b) attachment of the person's bank accounts; (c) attachment and sale of the person's immovable property; (d) arrest of the person and his detention in prison; (e) appointing a receiver for the management of the person's movable and immovable properties, and for this purpose, the provisions of sections 220 to 227, 228A, 229, 232, the Second and Third Schedules to the Income-tax Act, 1961 (43 of 1961) and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time, in so far as may be, apply with necessary modifications as if the said provisions and the rules made thereunder were the provisions of this Act and referred to the amount due under this Act instead of to income-tax under the Income-tax Act, 1961. ..." 187. It is for this reason also that M/s. Midfiled Industries Ltd. (supra), has no application in the present dispute. In M/s. Midfiled Industries Ltd. (supra), the High Court of Telangana adjudicated upon the issue-whether recovery proceedings under Section 28A of the SEBI Act, 1992 would have precedence over the SARFAESI Act, 2002. Importantly, in M/s. Midfiled In....
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....n for the introduction of the said Amendment was to provide primacy to the rights of the secured creditors as is seen from the statement of objects and reasons of the SARFAESI Act, 2002 and the RDB Act, 1993; thirdly, because by virtue of Section 37 of the SARFAESI Act, 2002 the RDB Act, 1993 and the SARFAESI Act, 2002 are to be read in addition to and not in derogation of each other. 192. The material part of the statements of objects and reasons of the RDB Act, 1993 reads as follows: "THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 STATEMENT OF OBJECTS AND REASONS Banks and financial institutions at present experience considerable difficulties in recovering loans and enforcement of securities charged with them. The existing procedure for recovery of debts due to the banks and financial institutions has blocked a significant portion of their funds in unproductive assets, the value of which deteriorates with the passage of time..." 193. Sections 31B of the RDB Act, 1993, read as under: "31B. Priority to secured creditors- Notwithstanding anything contained in any other law for the time being in force, the rights of secured credi....
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....d in the non-derogation provision, shall, therefore, be fundamentally different from the present case. However, the analysis in Kalupur Commercial Co-operative Bank Ltd. (supra), on Section 31B of the RDB Act, 1993 being attracted regardless of the actions being initiated by a Bank under SARFAESI Act, is relevant. 198. This court is in agreement with the views expressed by the High Court of Gujarat that regardless of the proceedings or actions being initiated under the SARFAESI Act, 2002, recourse may be taken of the RDB Act, 1993, by virtue of Section 37 of the SARFAESI Act, 2002. 199. The subsequent consideration then relates to Section 26E of the SARFAESI Act, 2002. Section 26E provides that the debt 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 Governments or local authority. 200. The material part of the statement of objects and reasons of The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016 reads as under: "The Recovery of Debts due to Banks and Financial Institutions Act, 1993 and the Securitisati....
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.... any property of the borrower for the purpose of securing due repayment of any financial assistance granted by such creditor to the borrower. It further provides that an authority or officer of the Central Government or any State Government or local authority, entrusted with the function of recovery of tax or other Government dues and for issuing any order for attachment of any property of any person liable to pay the tax or Government dues, shall file with the Central Registry such attachment order with particulars of the assesse and details of tax or other government dues from such date as may be notified by the Central Government. Section 26C seeks to provide that registration of security interest will be effective from the date and time of registration of transactions or filing of attachment orders with Central Registry and section 26D seeks to provide that secured creditor will be entitled to exercise right to enforce securities only if it is registered with Central Registry. Section 26E seeks to provide for the priority of debts due to secured creditors over all others debts, revenues, taxes, cesses and rates payable to central Government, State Government o....