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2015 (12) TMI 369 - SUPREME COURT

2015 (12) TMI 369 - SUPREME COURT - TMI - Amended Regulations effective from 1.10.2006 introducing Schedule IIIA into the Regulations questioned - Interpretation of provisions of Securities and Exchange Board of India (Stock-brokers and sub-brokers) Regulations, 1992 (for short the Regulations) as amended from time to time including Schedule III and IIIA - Held that:- We find ourselves in agreement with submissions advanced on behalf of the appellant that after 30th September, 2006 i.e. after Sc .....

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before this Schedule became applicable to him and such fees shall be paid as per the relevant provisions of Schedule III as if they had not ceased to be applicable to him.

The aforesaid clause is clarificatory in nature. It clarifies that the liability to pay fees as per Schedule III which has already accrued and got fastened to a stock-broker before the Schedule IIIA became applicable, would remain payable as per the provisions of Schedule III even after they cease to be effective f .....

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the impugned order of the SAT under appeal to be contrary to law. The same is accordingly set aside. The Appeal is allowed. - Civil Appeal No.3548/2010 - Dated:- 4-12-2015 - SHIVA KIRTI SINGH, J. For the Petitioner : Mr. Sarwa Mitter, Adv.for M/s Mitter & Mitter Co. For the Respondent : Mr. Bhargava V. Desai, Adv., Mr. Pratap Venugopal, Adv., Ms. Surekha Raman, Adv., Ms. Niharika, Adv.for M/s K.J. John & Co. ORDER 1. This is a statutory appeal preferred under Section 15Z of the Securiti .....

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replaced by concept of monthly fee on the basis of monthly turnover. The dispute is whether the latter would come into effect immediately from the date Schedule IIIA becomes applicable to a stock-broker or the earlier measure of fee on yearly basis would continue for a limited period till fee in accordance with Schedule III and the principle of turnover of the whole year is realized not only as per the previous year s turnover but for the entire up to date turnover till Schedule IIIA comes into .....

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y learned senior counsel Mr. Shyam Divan, such view of the SAT is impermissible in view of specific provisions of the Regulations, particularly clause (IV) to Schedule III and whole of Schedule IIIA which were introduced together by the third amendment to the Regulations with effect from 1.10.2006. Per submissions, the view is also contrary to the distinction between a turnover tax / tax on income in which case the annual turnover is targeted as the subject matter of levy on one hand, and a levy .....

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kers and sub-brokers) Regulations, 1992 (for short the Regulations) as amended from time to time including Schedule III and IIIA, it is not necessary to go into the facts. It is sufficient to notice that the appellant is a stock-broker trading, inter alia, as a member of the Bombay Stock Exchange Limited since 29.1.2004. It is not in dispute that the appellant and stock-brokers in general are regulated under the provisions of the Act and for conducting their trade or business they are required t .....

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rs SEBI to suspend the Registration Certificate of a stock-broker if he fails to pay the fees and on such suspension the stock-broker shall cease to sell or deal in securities as a stock-broker. 5. The appellant paid the registration fee in accordance with Regulation 10 read with Schedule III without any dispute for the financial years 2003-04, 2004-05 and 2005-06 based on the previous year turnover. After Schedule IIIA was inserted w.e.f. 1.10.2006, the appellant exercised the option under clau .....

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pellant paid pro rata only for the period upto 30.9.2006 on the basis of turnover of the previous year (1.4.2005 to 30.9.2005). SEBI, on the other hand, claimed that appellant had paid only half of his liability whereas he was liable to pay further ₹ 18,13,995/- even for the period from October 2006 to March 2007 regardless of the fact that from October 2006, as per Schedule IIIA he was liable to pay and had paid the registration fee on monthly basis on monthly turnover. Not only this, SEB .....

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2007-08. 7. As noticed earlier, due to above dispute the appellant preferred appeal No. 28 of 2009 under Section 15T of the Act. The SAT decided against the appellant and dismissed his appeal by the impugned order. 8. On hearing learned senior counsel for the appellant Mr. Divan and learned senior counsel for the SEBI, Mr. C.U. Singh, we find that the demands raised by SEBI is illegal being contrary to the Regulations particularly clause IV of Schedule III. It is also based on a misconception t .....

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the case of B.S.E. Brokers Forum v. Securities and Exchange Board of India, (2001) 3 SCC 482 decided by a three Judges Bench. Relevant part of para 45 of that judgment reads as follows:- 45. It cannot be disputed that the annual turnover of a broker is not the subject-matter of the levy but is only a measure of the levy. In other words, the fee is not being levied on the turnover as such but the fee is being levied on the brokers making their annual turnover as a measure of the levy which is a .....

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ar for levy of registration fee for each financial year. In reply Mr. Divan has contended that the charging provision is in fact Regulation 10 which requires every applicant for a certificate of registration to pay fees. Only the quantum and manner of payment of such fees has been left to be determined as per Schedule III or Schedule IIIA. 10. Further reply is that in clause 1(a), the annual turnover of the financial year has not been made the basis for computing registration fee for that financ .....

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to stock brokers to whom Schedule IIIA applies, from the time when it becomes so applicable. 11. We find ourselves in agreement with submissions advanced on behalf of the appellant that after 30th September, 2006 i.e. after Schedule IIIA admittedly became applicable to the appellant, no provisions in Schedule III could be applied to his case. We also find no merit in the contention advanced on behalf of SEBI that clause 4 of Schedule IIIA protects the demand raised by SEBI. Clause 4 of Schedule .....

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