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Premium Global Securities Pvt. Ltd. & Others Versus Securities & Exchange Board of India & Another

2015 (12) TMI 465 - SUPREME COURT

Refusal to grant fee continuity benefits to the Appellants - Whether the Appellants can be granted the benefit of fee continuity? - Held that:- It is beyond cavil that SEBI, as a trade regulator in the securities market, is entitled to charge registration fees for enabling it to carry out its functions as stipulated in Section 11(2) of the SEBI Act, 1992. However it appears at present that SEBI has pounced at the opportunity to charge fresh registration fees choosing to ignore the exemptions ass .....

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pulsion of law. The compulsion of law under the 1957 Rules is directed towards the desired end and not concerned with the means, and it would be wrong for us to ascribe otherwise. We thus set aside the impugned Judgment of SAT and direct that the Appellants be given the benefit of fee continuity. These Appeals stand allowed accordingly. - Civil Appeal No. 3682 of 2006 - Dated:- 9-12-2015 - Vikramajit Sen And Shiva Kirti Singh, JJ. JUDGMENT Vikramajit Sen, J. Civil Appeal No. 3682 of 2006, Civil .....

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t & Investments Pvt. Ltd. was incorporated on 24.6.1992, which on 9.2.1994 changed its name to Premium Capital Market & Investments Ltd (hereinafter PCMIL , Appellant No. 3). On an application for Trading Membership of National Stock Exchange of India Ltd. (hereinafter NSE ) in the Capital Markets Segment by PCMIL, vide letter dated 16.5.1994, NSE sent them an offer of membership subject to certain conditions enclosed in Annexure A . In its letter dated 4.10.1994 SEBI made observations o .....

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ffirming the applicability of Rule 8(1)(f) and 8(3)(f) of Securities Contract (Regulation) Rules, 1957 (hereinafter 1957 Rules ) to corporate members, via a letter directed all corporate members to sever connections with businesses other than securities business forthwith and requested NSE to report on compliance. In order to comply with this direction, Premium Global Securities Ltd. (later Premium Global Securities Pvt. Ltd., hereinafter PGSL , Appellant No. 1) was incorporated on 16.5.1995 for .....

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any other business and that the last leasing transaction was carried out in September 1995 and that PCMIL was only receiving lease amounts. 4. Thereafter on 4.4.2000 a fresh application was made for transfer of membership to PGSL and the NSE approved the aforesaid application on 12.4.2000 without any transfer fees. Steps for registration with SEBI were initiated and PGSL was issued the Registration Certificate on 20.9.2000. Meanwhile PCMIL received a letter from the NSE Disciplinary Committee d .....

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mpulsion of law to transfer their membership to:- i. 100% subsidiary company or ii. Group company or iii. holding company they shall not be required to pay fees afresh. In such cases, the Exchange would have to enumerate the circumstances under law resulting in the said transfer to 100% subsidiary/group/holding company for consideration by SEBI. For this purpose, A company would be classified as a group company of another company, if the controlling persons/entities in both the companies are sam .....

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roup company would not attract any fresh payment of registration fees. SEBI however, refused to grant PGSL the fee continuity benefits sought. On 4.12.2003 PGSL submitted another detailed representation to SEBI seeking grant of fee continuity. However no response was received from SEBI. Meanwhile on 15.7.2004, SEBI (Interest Liability Regularisation) Scheme 2004 came into force. The Scheme envisaged a waiver of 80% outstanding interest if the broker paid the outstanding principal along with 20% .....

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er themselves from their fund-based activities to keep in line with the provision. As a natural corollary thereof, SAT stated that although there was a compulsion of law on the Appellants, it did not extend to the extent that they were compelled to sever their brokerage business and transfer it to their subsidiary as they have in the present scenario; rather the Appellants could have severed their non-brokerage businesses, either give it up in entirety or transfer it to a subsidiary. The Appella .....

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3 SCC 482, to implement the recommendation of the R. S. Bhatt Committee. The benefit in the said circular can be granted only when the two essential conditions are satisfied. First that the company to which the transfer was made is indeed a 100% Subsidiary Company, Group Company or a Holding Company and secondly, whether there was a compulsion of law to transfer the said membership. There are no disputes on the satisfaction of the first essential condition. Thus we find the sole question for de .....

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lify themselves to enter the derivatives market. On the prevailing facts it was held that raising money to qualify for membership of a segment did not constitute a compulsion of law for the said merger. Mr. Ganesh submitted that in Ratnabali Capital Markets Ltd. this Court clearly demarcated that any action taken by the benefit-seeker must not be solely for profit-motive; its roots must emerge from a survival instinct which is so in the case before us. He stated that PGSL was put in the predicam .....

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e 1957 Rules. Mr. Sameer Parekh, one of the other Counsels for Appellants, submitted that PCMIL faced 4 options when told to comply with the aforesaid 1957 Rules. They could either: a) give up the fund-based business; b) give up the brokerage business; c) transfer the fund-based business to another company, which would cause great hardship to all involved as numerous contracts would have to be changed; or, d) transfer the brokerage business, and of the 4 the last was the path of least resistance .....

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is neither a compulsion of law nor has it been raised earlier. Mr. Singh placed reliance on Rules 8(1)(f) and 8(3)(f) of the 1957 Rules to submit that right from the start, the Appellants were under the restriction to not engage themselves in a business other than that of securities. He further brought to our attention Annexure A of the letter of acceptance of membership to the Capital Market Segment of the NSE which placed certain conditions on Appellants to be fulfilled within three months an .....

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isement placed in the newspapers calling for applications for Trading Membership of the Capital Markets Segment of NSE. He points out that this advertisement was published on 11.2.1994 and the last date for submitting applications was 25.2.1994, leaving a gap of merely 14 days. He states that this becomes relevant in light of the submissions placed on record by SEBI that only those companies who had no other business involving financial liabilities could apply. He submits that SEBI could not hav .....

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