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2015 (11) TMI 1220 - SC - Companies LawInterpretation of the term `annual turnover' - stand of the appellants is that the SAT has mis-interpreted the Explanation to paragraph 3 to hold that the "turnover" for purpose of fee will not be the value of the stocks under transaction but only the value of brokerage earned by the stock brokers like the respondent - Held that:- On a careful analysis of the Explanation occurring after paragraph 3 of Schedule III and the definition of `annual turnover' contained therein as also the reasonings in the impugned order we are constrained to hold that the SAT has erred in limiting the annual turnover of the respondent only to the amount of brokerage earned by it. The earning by way of brokerage represents only the part of price of securities received by the stock broker on his own account. The other and more significant part of the `annual turnover' as per the Explanation is the aggregate of the sale and purchase prices of securities, received or receivable by the stock broker on account of his clients in respect of sale and purchase or dealing in securities during the financial year. The view taken by the SAT that since in the wholesale debt market segment the broker has a limited role as per the RBI circular and since the broker does not receive the sale or purchase price because the payment is directly made to the seller, the broker will be saved from inclusion of the sale and purchase prices in his annual turnover, suffers from an apparent error. The error lies in not appreciating that the component of aggregate of sale and purchase prices which is receivable by the stock broker even on account of his clients is included in the annual turnover. Such sale and purchase price receivable by the stock broker on account of his clients, under the directions of the RBI through the circular dated June 20, 1992 presently goes directly to the seller but it is of no significance. Even if such sale and purchase price had actually been received by the stock broker not on his own account but on account of his clients, it could not belong to the broker and had to be passed on to the seller because such amount was receivable clearly on account of his clients in contradistinction to any part of sale and purchase price received or receivable by the stock broker on his own account. Thus viewed, the annual turnover of the stock broker as per the Explanation must include the value of entire transaction for the purpose of computing the registration fee as per Schedule III of the Regulations. In no case the term 'annual turnover' can be so interpreted as to mean only the amount earned by the stock broker by way of brokerage. So far as defence of the respondent that in the wholesale debt market segment, at least prior to 2003, the SEBI was required only to 'monitor' and not to 'regulate' such market cannot cut any ice because the provisions relating to registration fee by the SEBI have already been held valid and in the present proceedings there is no challenge to the relevant provisions including those in Schedule III of the Regulations. As already noted, in the case of B.S.E. Brokers' Forum [2001 (2) TMI 957 - SUPREME COURT OF INDIA ] this Court directed the SEBI to incorporate the relevant recommendations of the Bhatt Committee in the Regulations and as a result the rate of fee on Government securities etc. dealt in the wholesale debt market was lowered and pegged at 1/10th in comparison to fees payable by the stock brokers in other segment. Thus impugned order passed by the SAT as erroneous in law. It is accordingly set aside. Appeal allowed
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