TMI Blog2019 (11) TMI 847X X X X Extracts X X X X X X X X Extracts X X X X ..... r is it the same entity. Incorporation as a company and registration as a SEBI intermediary are two different and distinct processes where there are additional rules and regulations to be adhered to. This is a case of a complete takeover of a brokerage by a new entity Garban and the new registration granted by SEBI is in the name of Garban. Both the NSE and SEBI have categorically stated to the appellant through multiple correspondences that the appellant cannot claim fee continuity benefit only on the ground that the appellant has been seeking the same through their earlier correspondences. Those claims were put to rest the day SEBI granted a fresh registration number and from that date it has to be treated as a separate broker distinct from the original Pennar as far as its business is concerned. Accordingly, the orders relied on by the appellant relating to a Company is a legal entity in perpetuity, though correct, is not relevant in the context. The date of initial registration of the appellant is to be treated as October 20, 2000, the date of granting the fresh registration by SEBI and all fee liabilities arising from its turnover have to be recalculated with effect from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding payment at the rate of 15% per annum. (d) Appellant shall submit the turnover data in the prescribed proforma for the five year period from October 20, 2000 within one month from the date of this order and SEBI shall compute the fee liability and communicated to the appellant within a period of one month thereafter. Payment arising from the revised calculations, from either of the parties, shall be completed within one month thereafter. - Appeal No. 56 of 2004 - - - Dated:- 19-9-2019 - Justice Tarun Agarwala, Presiding Officer, Dr. C.K.G. Nair, Member And Justice M.T. Joshi, Judicial Member For The Appellant : Mr. P.N. Modi, Senior Advocate with Mr. Neville Lashkari, Mr. Sharad Abhayankar, Mr. Manish Chhangani and Ms. Yamini Kumar, Advocates i/b Khaitan Co. For The Respondent : Mr. Kevic Setalvad, Senior Advocate with Mr. Abhiraj Arora and Mr. Vivek Shah, Advocates i/b ELP ORDER Per : Dr. C.K.G. Nair, Member 1. This appeal has been filed aggrieved by the order of the Chief General Manager of Securities and Exchange Board of India ( SEBI for short) dated November 28, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the amount matures, the same should be refunded to the SEBI without any delay. 4. Further facts relevant to the matter are the following:- ( a) The appellant was incorporated as M/s Pennar Investments Ltd. ( Pennar for short) on July 11, 1994. ( b) On August 6, 1994 appellant received SEBI registration No. INB230629530 as a broker. It also received registration from National Stock Exchange of India Limited ( NSE for short), Respondent No. 2 as a trading member in the Wholesale Debt Market (WDM) segment. ( c) In April 1999 a foreign company, M/s, Garban PLC decided to invest in the appellant. Accordingly, appellant wrote to NSE on April 7, 1999 seeking permission to transfer 51% of the shares of the appellant to Garban PLC, since such permission had to be obtained as per the rules / conditions specified in the bye-laws of NSE. On April 15, 1999 NSE replied specifying certain conditions including payment of transfer fee, additional interest fee deposit etc. and stating that changes in the shareholding of the trading member company which results in the shareholding of the dominant shareholders fallin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... system in the name of M/s. Garban Intercapital IL Ltd. ( h) It is important to note that the fresh registration certificate granted by SEBI on October 20, 2000 is in the name of Garban Intercapital IL Ltd. and not in the name of Pennar and by letter dated October 31, 2000 NSE informed the erstwhile Pennar that consequent to SEBI registration dated October 20, 2000 earlier registration in the name of Pennar has been withdrawn. The appellant was also directed to complete the process (as per an attached list to the said letter) which are steps to be taken by a new member of the stock exchange for operationalising their trading, clearing and settlement activities. ( i) On February 1, 2001 the Supreme Court directed SEBI to amend regulations incorporating the recommendations of the Bhatt Committee relating to incidence of turnover fees payable to SEBI and on February 20, 2002 SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 were amended to incorporate the same. Accordingly, ad valorem fees are payable on the stock brokers annual turnover for the first five years of registration and after the expiry of five years from the date of initial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by this Tribunal. Hence, the three issues relating to the applicability of fee continuity benefit on the basis of whether appellant is a case of fresh registration or not; whether interest is applicable on the pending payment, if any and on refund of excess amount paid, if any, to be decided afresh. 5. Learned Senior Counsel Shri P.N. Modi extensively argued that the impugned order is completely unjustified in treating the appellant s case as a fresh registration when all along the appellant has been seeking continuation of the membership originally granted to Pennar. It was contended that the appellant s corporate form remains the same, it is the same legal entity, only some share capital has been changed hands which does not change the legal status of the perpetual corporate legal person. As such, the date of initial registration of the appellant should be treated as the first date of registration granted to Pennar on August 6, 1994. It was further submitted that once the initial registration is treated as the starting point of the appellant, five years period would be over by August 5, 1999 for which payments have been made based on the turnover applicable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons were amended by the SEBI to incorporate the recommendations of Bhatt Committee. So, if at all any interest is to be charged it should be done only from February 20, 2002, the date of such amendment. 9. In brief, the learned senior counsel contended that the transfer of the membership should not be considered as new membership and fee continuity benefit should be given to the appellant treating the appellant as the same perpetual legal entity; turnover fee should be calculated at the rate of 0.001% because the appellant deals only in the WDM segment; interest, if any, should be calculated from the date of amending the relevant regulations and excess payments made to SEBI should be refunded to the appellant. 10. The learned counsel for the appellant relied on a few of judgments in support of his contention that the appellant is entitled to have benefit of fee continuity by treating the initial registration in 1994 as the relevant factor for determining the turnover fee. To this effect he cited Ratnabali Capital Markets Ltd. vs. SEBI Ors. (2008) 1 SCC 439 and Gurudevdatta Vksss Maryadit and Ors. vs. State of Maharashtra and Ors. (2001) 4 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of interest on delayed payment of fees was adopted by SEBI on January 7, 1993 when vide a letter it directed all the stock exchanges to calculate the fees payable by brokers as per the methodology recommended by the Bhatt Committee report. Therefore, the submission that interest is due only from the date of incorporating the Bhatt Committee recommendations in the Regulations on February 20, 2002 has no merit. Moreover, there is another amendment to the Regulations providing for payment of interest at the rate of 15% per annum with effect from December 16, 1998. 13. Learned senior counsel further emphasized that the appellant did not provide the turnover details as per proforma and hence it was not certified by NSE. Therefore, given that the detail of the turnover was not clear, the benefit at the rate of 0.001% could not be given and treating its turnover as if from multiple segments of the stock market cannot be faulted. 14. The learned Senior Counsel further contended that in SEBI vs. Prebon Yamane (India) Limited (2015) 16 SCC 89 the Supreme Court upheld that only partnership getting converted into corporate form alone has been bestowed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te it has to be treated as a separate broker distinct from the original Pennar as far as its business is concerned. Accordingly, the orders relied on by the appellant relating to a Company is a legal entity in perpetuity, though correct, is not relevant in the context. The date of initial registration of the appellant is to be treated as October 20, 2000, the date of granting the fresh registration by SEBI and all fee liabilities arising from its turnover have to be recalculated with effect from this date. Since rate of interest of 15% per annum has been implemented on delayed payment by SEBI from December 16, 1998 interest, if any, on the registration fee / turnover fee @ 15% per annum also is due from the appellant on any delay in depositing/ paying the principal amount of fee. 16. On the issue of the rate of turnover fee applicable to the appellant we do not agree with the submissions of respondent SEBI. It is on record that the appellant did give an auditor s certificate. The turnover proforma produced by SEBI before us consists of two parts; its upper part showing the turnover table and lower part showing fee computation table. What is argued before us is that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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