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of <h1>Supreme Court rules on SEBI fee continuity benefit post amalgamation: No entitlement, fresh registration fees required</h1> The Supreme Court dismissed the appellant's challenge to SEBI's decision regarding fee continuity benefit claimed under SEBI Regulations due to ... Entitlement to fee continuity benefit claimed under the provisions of Securities & Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 - whether the appellant is entitled to the fee continuity benefit in terms of the Regulations. Regulation 10 mandates that every applicant eligible for grant of a certificate shall pay such fees and in such manner as specified in Schedule III. - Held that:- The facts of the case have been properly appreciated by SAT for coming to the conclusion that the amalgamation was not on account of any compulsion of law. The compulsion of the appellant was a business compulsion to do business as a broker with NSE. Initially the Vadodara Stock Exchange Ltd. had chosen to form another subsidiary company limited by guarantee ignoring the circular of the SEBI dated 16.12.1999 and also the bye rules of NSE laying down conditions for membership but later it decided to have a subsidiary company which could get registration as a broker with NSE. Such decision was effected through amalgamation. Such a situation cannot be treated as a compulsion of law for amalgamation. Even if we accept the submission that the compulsion of law be given a liberal meaning so as to include orders and directions of the SEBI, in the present case it is not possible to accept that amalgamation was forced upon the appellant under orders or directions of the SEBI. Only because the appellant and the parent company Vadodara Stock Exchange Ltd. subsequently decided and opted to do business as a broker with NSE, they chose the path of amalgamation. They could have as well chosen the path of winding up of the earlier subsidiary company. In the facts of the case it is not possible to accept that there was any compulsion of law for the merger/ amalgamation of the VSE Securities Ltd. with the appellant. When the facts disclose that amalgamation/ merger had to be resorted to as an alternative to liquidation then it may be successfully urged that merger/ amalgamation was on account of compulsion of law so as to attract the exemption assured by the SEBI under the circular dated 30.09.2002. The facts of this case even remotely do not suggest any such or similar situation. Issues:Challenge to order dated 18.5.2006 by Securities Appellate Tribunal regarding fee continuity benefit claimed under Securities & Exchange Board of India Regulations, 1992.Analysis:1. The appellant sought fee continuity benefit under SEBI Regulations due to amalgamation with a subsidiary company to operate on National Stock Exchange (NSE). SEBI refused recognition, citing policy decisions. The appellant challenged SEBI's decision before SAT, which was dismissed.2. The key issue was whether the appellant was entitled to fee continuity benefit as per the Regulations. Regulation 10 required payment of fees for a certificate, failure of which could lead to suspension of the registration certificate, halting stockbroker activities.3. The Rules prescribed conditions for stockbroker certification and fee payment. The SEBI issued circulars clarifying fee payment post a Supreme Court judgment. The appellant relied on a circular dated 30.09.2002 for fee continuity benefit due to amalgamation.4. The appellant argued that amalgamation was due to compulsion of law as SEBI's policy required only one subsidiary for registration as a broker. The Gujarat High Court approved the amalgamation, and the appellant contended that fees paid by the transferor company were now assets of the appellant.5. SEBI contended that the amalgamation was voluntary to access a larger business through NSE membership, not due to any legal compulsion. SAT's decision was based on the understanding that the amalgamation was a business decision, not a legal compulsion.6. The Supreme Court analyzed the facts and determined that the amalgamation was not due to any legal compulsion but a business decision to operate as a broker with NSE. The Court emphasized that the circular's exemption for compulsion of law did not apply in this case.7. Referring to a previous judgment, the Court clarified that fresh registration fees were required post-merger for a new entity entering derivative markets. The Court found no grounds to deviate from this principle, as the facts did not support a scenario of amalgamation due to legal compulsion.8. Consequently, the appeal was dismissed as the Court found no merit in the appellant's claim for fee continuity benefit. No costs were awarded in the matter.
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