TMI Blog2023 (3) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be paid as a guiding principle by the stock broker which is in conformity with the scheme of Regulations 1992. Whether the appellant Company is entitled to fee continuity benefits under Para 4 of Schedule III of the Regulations 1992? - When Srikant Mantri transferred his membership card of CSE to the Company, he was not a whole time Director but was only a Director. Neither CSE nor its internal auditors, were clear of the exact date on which Srikant Mantri had acquired 40% shareholding in the appellant Company. As was informed by the Board to the CSE vide letter dated 18th March, 1998 that Srikant Mantri was holding less than 40% of the paidup capital of the corporate entity. It was also recorded by the Tribunal that from the true copies of annual returns provided by the appellant Company, it was revealed that the details of the Directors provided by them nowhere indicate Srikant Mantri as a whole time Director for any of the relevant years. The designation of Srikant Mantri has been indicated as Director in all the relevant years Annual Return. It was also established from the copy retrieved from ROC s office in respect of AGM dated 28th April, 1997 and 19th May, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a stock broker on 17th October, 1995. Thereafter, when the membership card of Srikant Mantri was transferred in the name of the Company, the latter became a member of CSE and was registered as a stock broker of CSE on 1st April, 1998. 3. After obtaining the membership of CSE on transfer of the card from Srikant Mantri, the appellant Company claimed that it should be exempted from payment of registration fee for the period for which Srikant Mantri had already paid the fees. In other words, it claimed the benefit of exemption of the fee already paid by Srikant Mantri. At the same time, also claimed that all the conditions prescribed under para 4 of Schedule III to the Regulations were satisfied and, therefore, it was entitled to claim exemption. 4. The claim of the Company was rejected by the Board by its Order dated 7th May, 2007 holding that Srikant Mantri was only a Director in the Company during the three years period after the transfer of his membership and since he was not the whole time Director, the conditions prescribed under para 4 of Schedule III are not satisfied and accordingly, was not entitled to claim exemption as prayed for by the appellant. 5. The appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng activity and further submits that the interpretation ought to be in consonance with the intent and purport of the policy to which para 4 was added to Schedule III. 11. Learned counsel further submits that in the case of conversion, the individual registration has been converted into a corporate registration and, therefore, the exemption for the payment of fees is available and further submits that para 4 to Schedule III does not contemplate two registrations. The Explanation to para 4, by a deeming fiction, mandates a continuity from the erstwhile membership to the converted membership qua the payment of fees and further submits that the law, therefore, mandates that in a case of conversion, no fresh fee will be collected from the converted corporate entity. In the facts and circumstances, the finding returned by the Tribunal needs to be interfered with by this Court. 12. Per contra, learned counsel for the respondent, while supporting the finding returned by the Board and affirmed by the Tribunal submits that the material which has come on record has been appreciated at two stages by the Board as well as by the Tribunal. It remains uncontroverted that Srikant Mantri trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant appeal confines as to whether the appellant Company is entitled to fee continuity benefits under Para 4 of Schedule III of the Regulations 1992. 17. To examine the said issue no. (ii), it will be apposite to first take note of para 4 of Schedule III of Regulations, 1992 which is as follows : Where a corporate entity has been formed by converting such individual or partnership membership card of the exchange, such corporate entity shall be exempted from payment of fee for the period for which the erstwhile individual or partnership member, as the case may be, has already paid the fees subject to the condition that the erstwhile individual or partner shall be the whole time director of the corporate member so converted and such director will continue to hold minimum 40 per cent shares of the paid up equity capital of the corporate entity for a person 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 entity for the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to the benefit under paragraph 4 of the Schedule because there is no continuity. As already noticed, the corporate entity is not entitled to claim exemption from the payment of registration fee only if the individual or partnership had been converted into a corporate entity. In the instant case, Srikant Mantri did not convert himself into a corporate entity but instead, transferred his membership card of CSE to an existing company and became a director therein. The Regulations do not provide for exemption in such cases. The company before us was an existing company and therefore, when it became a member of CSE on the transfer to membership card from Srikant Mantri it could not claim the benefit under paragraph 4. It could claim such a benefit only if Srikant Mantri had formed himself into a company and continued his broking business. Since that was not the case, we are clearly of the view that the company could not claim the benefit of paragraph 4. In this view of the matter, we have no hesitation in upholding the order passed by the Board rejecting the claim of the appellant. 20. It remains uncontroverted that when Srikant Mantri transferred his membership card of CS ..... X X X X Extracts X X X X X X X X Extracts X X X X
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