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2023 (7) TMI 1128 - HC - SEBISEBI requisite legal power vested in it to direct the petitioner bank - nature of powers conferred upon SEBI - recovery of debts due to banks and FIs - prevention of auctioning the mortgaged property - do the persons or classes of persons referred to in Section 12 necessarily have to be registered with SEBI in order to be subject to its powers under Section 11B? - petitioner is aggrieved by the impugned emails/communications dated 29.01.2021 and 18.03.2021 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 - HELD THAT - One plain meaning that can be given to Section 11B(1)(iii)(a), it being, that persons or class of persons referred to in Section 12, are referred irrespective of the registration under Section 12. In other words, in order for Section 11B(1)(iii)(a) to be attracted, one may only need to fall in the person or class of persons referred to in Section 12 irrespective of their registration with SEBI. 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 auctioning the mortgaged property being Villa in Gurgaon under the provisions of the SARFAESI Act, 2002. The impugned emails dated 29.01.2021 and 18.03.2021 are found to be erroneous and wholly without jurisdiction. The proceedings under the SARFAESI Act, 2002 are to be treated as a carve out to, and remain unaffected by, the orders and directions passed under the SEBI Act, 1992.
Issues Involved:
1. Jurisdiction of SEBI to direct banks 2. Applicability of SEBI orders to the petitioner bank 3. Effect of SEBI orders on the petitioner bank's right to auction the mortgaged property 4. Maintainability of the writ petition 5. Interplay between SARFAESI Act, 2002, RDB Act, 1993, and SEBI Act, 1992 Summary: Jurisdiction of SEBI to direct banks: SEBI is vested with the requisite legal power to direct banks, including the petitioner bank, under the SEBI Act, 1992. This power is necessary for SEBI to ensure that its investigations or enquiries are effective and not undermined by the dissipation of assets. Applicability of SEBI orders to the petitioner bank: The orders dated 29.05.2018 and 14.12.2018 passed by SEBI are applicable to the petitioner bank. However, the specific wording of the directions within these orders does not prevent the petitioner bank from auctioning the mortgaged property. Effect of SEBI orders on the petitioner bank's right to auction the mortgaged property: The SEBI orders do not contain explicit directions that prevent the petitioner bank from alienating the assets of respondent nos. 3 and 4, including the mortgaged property. The directions primarily focus on preventing the entities and persons involved from accessing the securities market and disposing of assets without SEBI's permission. Maintainability of the writ petition: The writ petition is maintainable as the petitioner bank is not aggrieved by the SEBI orders themselves but by the impugned emails/communications dated 29.01.2021 and 18.03.2021, which were found to be erroneous and wholly without jurisdiction. These emails expanded the scope of the SEBI orders beyond their actual content. Interplay between SARFAESI Act, 2002, RDB Act, 1993, and SEBI Act, 1992: The SARFAESI Act, 2002, with its non-obstante clause in Section 35, takes precedence over the SEBI Act, 1992. The provisions of the SARFAESI Act, 2002 are not in derogation of the SEBI Act, 1992 but are in addition to it, allowing banks to realize their secured debts without interference from SEBI orders. Conclusion: 1. SEBI has the power to direct banks. 2. SEBI orders apply to the petitioner bank but do not prevent the auction of the mortgaged property. 3. The impugned emails were erroneous and without jurisdiction. 4. The writ petition is maintainable. 5. Proceedings under the SARFAESI Act, 2002 remain unaffected by SEBI orders. The writ petition is disposed of accordingly.
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