TMI Blog2022 (6) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... not patently arbitrary, discriminatory or mala fide. SEBI is an expert body constituted to deal with the securities market and is empowered to regulate activities of various entities including Investment Advisors while protecting the interest of investors. From a reading of Circular dt.23.9.2020, it is clear that the parties i.e. the client and the Investment Advisors are given a choice to choose between either a fixed fee mode or fee fixed on the basis of AUA. In the later mode, the fee is chargeable on the basis of AUA per annum. We do not find anything arbitrary or illogical in this arrangement which would prevent Investment Advisors from giving proper advice to clients or dis-incentivising them. - CWP-1838-2022 (O&M) - - - Dated:- 20-5-2022 - HON BLE MR JUSTICE M.S. RAMACHANDRA RAO AND HON BLE MR JUSTICE H.S. MADAAN Present: - Petitioner No.1 in person. Mr. Ashwani Kumar Chopra, Sr. Advocate, with Mr. Manish Jain, Advocate; Mr. Raghubir Nijjar, Advocate; Mr. Vidul Kapoor, Advocate, for respondent No.1. Mr. Alok Kumar Jain, Sr. Panel Counsel, for respondent No.2-UOI. **** M.S. RAMACHANDRA RAO, J. The Background facts Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment Advisor shall charge fees from a client under any one mode i.e. (A) or (B) on an annual basis. The change of mode shall be effected only after 12 months of on boarding/last change of mode. c. If agreed by the client, Investment Advisor may charge fees in advance. However, such advance shall not exceed fees for 2 quarters. d. In the event of pre-mature termination of the Investment Advisor services in terms of agreement the client shall be refunded the fees for unexpired period. However, Investment Advisor may retain a maximum breakage fee of not greater than one quarter fee. The instant Writ Petition In this Writ Petition, the petitioners seek a Writ of Mandamus to respondent No.1 to withdraw Regulation 15A of SEBI (Investment Advisors) Regulations and also the Circular dt.23.09.2020 referred to above, making provision for fixation of fee to be charged by Investment Advisors from their clients on the following grounds: - (a) The Regulation 15A and the consequent Circular violate Article 14, 19(1)(g) of the Constitution of India and deprive the Writ Petitioners of their fundamental rights of equality, practicing a profession and of the right to carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y will act as disincentive to the Investment Advisors from putting their best skills/hard work, vision, judgment, calculated risks; and Investment Advisors will then only work to the extent of generating enough returns to retain the client but, not to earn more for the client. Therefore, they are not in the best interest of the investors and are contrary to the duty cast on the SEBI under the SEBI Act 1992 to protect the interest of investors and securities. The party-in person/Petitioner No.1 reiterated the said contentions. The Stand of the SEBI (respondent No.1) In the written statement filed on behalf of respondent No.1, it is contended that these contentions of the Writ Petitioners are not tenable. It is contended that in the year 2013, SEBI, in exercise of the powers conferred by Section 30(1) read with Section 11(2)(b) of the Securities and Exchange Board of India Act (hereinafter : SEBI Act ) issued the SEBI (Investment Advisors) Regulations, 2013 to register and regulate the working of the Investment Advisors in the interest of securities market and to project the interests of investors. Post coming into force of the SEBI (Investment Advisors) Regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees and put a ceiling on the fees existed in SEBI (Investment Advisors) Regulations, 2013 much before the insertion of Regulation 15A also. Regulation 15(9) under the Chapter III-General Obligations and Responsibilities of the SEBI (Investment Advisors) Regulations, 2013 (hereinafter referred to as Investment Advisor Regulations, 2013) provided as follows: - GENERAL OBLIGATIONS AND RESPONSIBILITIES General responsibility. 15. (1) xx .. (9) An investment adviser shall abide by Code of Conduct as specified in Third Schedule. The Third Schedule to the Investment Advisor Regulations, 2013 in its Clause 6 further provides that: (6) Fair and reasonable charge An investment adviser advising a client my charge fee, subject to any ceiling as may be specified by the Board. The investment adviser shall ensure that fees charged to the clients is fair and reasonable . It is contended that petitioners had only referred in para 10 and 11 of their Writ Petition to a profit sharing model of fee i.e. higher the profit earned due to advice of the Investment Advisor, higher should be the fee of the Investment Advisor but, this submission fails to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltations were done by inviting suggestions from the general public; that there is no violation of any fundamental rights of the petitioners; and this Court in exercise of its jurisdiction under Article 226 of the Constitution of India should be slow in interfering with the decision of SEBI as it is a matter of economical policy. He also contended that the restrictions imposed by SEBI under the Regulation 15A and the Circular dt.23.09.2020 cannot be said to be unreasonable and would fall within the permissible limits as per Article 19(6) of the Constitution of India. He, therefore, prayed for the Writ Petition to be dismissed. The consideration by the Court In Ehsan Khalid Vs. Union of India 2014(13) SCC 356, the Supreme Court had held that where there is a challenge to a Government policy, particularly economic policy, Court would not interfere in such policy matters in exercise of its power of judicial review unless such policy is found to be grossly arbitrary or unfair or unreasonable or irrational or violative of Constitutional provisions or contrary to statutory provision. Similar view was expressed in Zippers Karamchari Union Vs. Union of India 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r policy decision would have been fairer or wiser or more scientific or logical. The court can interfere only if the policy decision is patently arbitrary, discriminatory or mala fide. (emphasis supplied) In view of this settled legal position, we are of the opinion that it is not the function of this Court to sit in judgment over a matter of economic policy such as that contained in the Regulation 15A and the Circular dt.23.09.2020 though, this Court might feel that a different policy would have been fairer or wiser or more scientific or more logical when such policy is not patently arbitrary, discriminatory or mala fide. The SEBI is an expert body constituted to deal with the securities market and is empowered to regulate activities of various entities including Investment Advisors while protecting the interest of investors. From a reading of Circular dt.23.9.2020, it is clear that the parties i.e. the client and the Investment Advisors are given a choice to choose between either a fixed fee mode or fee fixed on the basis of AUA. In the later mode, the fee is chargeable on the basis of AUA per annum. We do not find anything arbitrary or illogical in this arrang ..... X X X X Extracts X X X X X X X X Extracts X X X X
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