TMI Blog2006 (5) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... ship membership into a corporate entity prior to April 1, 1997 are entitled to the fee continuity benefit in terms of paragraph 4 of Schedule III to the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 (hereinafter called the Regulations ) is the short question that arises for consideration in this bunch of 67 appeals filed by the stock brokers under Section 15T of the Securities and Exchange Board of India Act, 1992 (for short the Act ) challenging the action of the Securities and Exchange Board of India (for short the Board ) denying them the said benefits. Since the answer to the question involved depends upon to the interpretation of the Regulations, the facts in so far as they are necessary a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate shall pay such fees and in such manner as is specified in schedule III to the Regulations. Since the answer to the question posed in the earlier part of the order depends upon the interpretation of paragraph 4 in schedule III the same is reproduced hereunder along with some other relevant paragraphs: I.Fees to be paid by the Stock Broker. 1. Every stock broker shall subject to paragraphs 2 and 3 of this Schedule pay registration fees in the manner set out below: (a)where the annual turnover does not exceed rupees one crore during any financial year, a sum of rupees five thousand for each financial year; (b)where the annual turnover of the stock-broker exceeds rupees one crore during any financial year, a sum of rupees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corporate entity for a period of at least three years from the date of such conversion. Explanation: It is clarified that the conversion of individual or partnership membership card of the exchange into corporate entity shall be deemed to be in continuation of the old entity and no fee shall be collected again from the converted corporate entity for the period for which the erstwhile entity has paid the fee as per the regulations. 4A 5. If a stock broker fails to remit fees in accordance with Paragraphs 1 and 2, he shall be liable to pay interest at 15% per annum for each month of delay or part thereof: Provided that the liability to pay interest as aforesaid may be in addition to any other action which the Board may take a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that paragraph 4 in schedule III was inserted with effect from 21.1.1998 to exempt the corporate entity from paying fee to the Board for the period for which it had already been paid by the individual or partnership prior to its conversion. It provides that when an individual or a partnership converts itself into a corporate entity, it shall be exempted from payment of registration fee for the period for which the erstwhile individual or partnership has already paid that fee. The words where a corporate entity has been formed .. as used in paragraph 4 leave no room for doubt that every individual or partnership member of the exchange which stood corporatised on the date of coming into force of paragraph 4 and thereafter would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e more clear. However, by a circular dated March 28, 2002, the Board restricted the benefit of exemption contained in paragraph 4 and restricted the same to the corporate members who were converted on or after April 1, 1997. As already observed above, the plain language of the paragraph does not restrict such benefits to the brokers who were corporatised after April 1, 1997. By restricting the benefit to such class of brokers, the Board in our opinion is adding words in the paragraph which do not exist. This is clearly impermissible. The Board wants to restrict the benefits of paragraph 4 to only those brokers who were corporatised on or after 01/04/1997 when there are no such words in the paragraph restricting the benefit to that class of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip member had paid cannot be sustained. 7.The appellant in appeal No. 310 of 2004 pointed out during the course of the hearing that there was a partnership firm which was carrying on the broking business since the year 1991 with two partners and that it got corporatised in the year 1996 and that both the erstwhile partners became the directors in the company but did not have the requisite percentage of shares in the equity capital of the corporate entity as on 21/01/1998 when paragraph 4 was inserted in schedule III to the Regulations. We have reproduced paragraph 4 in the earlier part of the order and it not only requires that the erstwhile individual or partnership has to convert itself into a corporate entity but further requires t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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