TaxTMI 
TaxTMI 
2010 (6) TMI 856
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....ata with breakup of the members of the Petitioner No.1 Association which has been furnished to the SEBI by the Delhi Stock Exchange Association Limited (DSEAL) (Respondent No.3 herein) till the expiry of the regularization period on 15th November 2004. The second prayer is that the Petitioners should be allowed the benefit of the reduced rate of fees prescribed by Clause (bb) of Schedule III of the said SILRS while participating therein to avail the benefit of the 80% waiver of interest liability. 2. A third prayer is for a writ of mandamus directing the SEBI to forthwith consider and accept the turnover data with breakup of the members of the Petitioner No.1 Association and submitted to the SEBI through the DSEAL in the prescribed format before the commencement of the regularization period for the purposes of calculations of the outstanding registration fees and interest thereon strictly in terms of the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 and the concessions allowed under the SILRS. 3. The fourth prayer is that the SEBI should be directed to correct/revise the "Fee Liability Statements" issued under the SILRS in relation to the members of the Petitioner No.1 A....
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....00/- only for every block of five years. According to the Petitioners, therefore, the annual turnover of the brokers is relevant only for the purposes of computation of this SEBI registration fees liability and is, therefore, relevant only for the first five years from the date of registration with SEBI and not thereafter. Following the various representations against the circulars, the amended regulations, SEBI constituted a Committee under the Chairmanship of Shri R.S. Bhatt, the then Chairman of Unit Trust of India. 7. The registration fee requirement was challenged by several stock brokers through writ petitions in different High Courts. One of those writ petitions was transferred to the Supreme Court. It was disposed of by the judgment in B.S.E. Brokers' Forum, Bombay v. Securities Exchange Board of India 2001 (3) SCC 482. While upholding the levy based on the annual turnover of the brokers, the Supreme Court observed that there should be changes brought about in the definition of annual turnover and also in the quantum of the levy pertaining to the certain specific transactions treated as part of the turnover. Following the above judgment and pursuant to the recommendations ....
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.... apart from giving various clarifications relating to the fees to be paid by the stock brokers, also for the first time indicated the details of various components of the turnover as per the amended regulations that was required to be furnished by the respective stock brokers duly supported by Auditor"s Certificate and even the format of such Auditor"s Certificate was prescribed in the circular dated 28th March 2002. It is pertinent to note that the turnover data in the said circular, duly certified by their auditors, was to be furnished by the stock brokers not directly to the SEBI, but to the DSEAL which was obliged to recompile the same in the prescribed format and forward it to the SEBI. 10. According to the Petitioner, a reading of the above circular dated 28th March 2002 showed that it was solely for the purpose of streamlining the process of the administration of the SEBI fee regime that DSEAL was introduced as a conduit. DSEAL was to act purely as an agent of the SEBI. DSEAL was required to verify the turnover figure submitted by its members with its own records and in case of any discrepancy the DSEAL was required to settle the same with the member concerned. 11. A furth....
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.... liability in accordance with various circulars of the SEBI including the circular dated 28th March 2002. It was emphasized that the exercises had to be completed before the end of May 2004 itself. It is stated that M/s. K.C. Khanna & Company while compiling the turnover data acted contrary to the instructions contained in the letter dated 29th March 2004 and completely ignored the requirements of the SEBI circular dated 28th March 2002. Consequently, the turnover data was forwarded to SEBI by the DSEAL on 9th July 2004 without complying the essential requirements of the circular dated 28th March 2002. Even SEBI pointed out apparent mistakes in the turnover data as sent by the DSEAL. It is stated that issue was discussed in a meeting of the Board of Directors of DSEAL held on 14th July 2004. It was decided to make a representation to the SEBI. 16. Pursuant to the above decision some of the members of the DSEAL met a senior official of SEBI. It is stated that they were assured that the revised data would be accepted by SEBI. In the circumstances, DSEAL withdrew the data compiled by M/s. K.C. Khanna & Company decided to resubmit it to the SEBI. 17. It is stated that owing to the fa....
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....m individual to corporate memberships understood that they would be accorded "fee continuity benefit". They found that they were being charged fees on their entire turnover at the highest rates without being given any opportunity to submit the auditor certified turnover data with the breakup. Further it was found that the provisional fee liability statement did not account for some of the payments made by the individual brokers on account of registration fees from time to time. Thereafter, the members of the Petitioner No.1 Association approached the DSEAL, they were informed of the lapses of M/s. K.C. Khanna & Company. DSEAL assured the members of the Petitioner No.1 Association that the corrections would be made in the data and that the liability to principal fee and interest would be reflected in the "Final Fee Liability Statement" which was to be issued by SEBI. 20. It is stated that the Petitioners thereafter submitted all the information as sought by the DSEAL. It is stated that on 10th October 2004, members of the Petitioner No.1 Association received the "Final Fee Liability Statement" where again they were surprised to note that there was no change from the provisional sta....
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....ujarat High Court in LPA No.1553 of 2005 in the case of Ajay Sarabhai v. Union of India. In this case, the SEBI assessed the registration fee on the basis of the data earlier given by the petitioners to the stock exchange without breakup of the turnover data and SEBI did not give remission of 80% interest on delayed payment of registration fee as per the provision of SEBI Scheme, 2004, as the stock brokers of the Ahmedabad Stock Exchange did not submit turnover data with breakup of the transactions along with the auditors certificate before the cut off date. The petitioners contended that they were not individually informed of such circulars or reminders from SEBI, however, the Learned Single Judge had noted that a large number of stock brokers of Ahmedabad Stock Exchange had already availed the benefit of the Scheme. The Division Bench in this case passed an interim order that if the appellants furnished auditors certificates for data with the breakup in the respect of transaction attracting lower rate of registration fee and paid deficit registration fee, along with interest within one month, then the Respondent shall not take any adverse action against the petitioners. This case....
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....f data revision. Since the regularization had already come to an end on 30th November 2004, no relief could be granted to the Petitioners. Mr. Sanjay Jain, learned Senior counsel appearing for the SEBI submits that M/s. Doogar and Associates while re-submitting revised data stated that they did not vouch for the correctness and authenticity of the figures, therefore, said data could not be taken on record. Even otherwise the data furnished was not in accordance with the regulations. 27. The above submissions have been considered. The starting point for the present dispute is the judgment of the Supreme Court in B.S.E. Brokers' Forum, Bombay v. Securities Exchange Board of India which negatived the challenge raised by the brokers to the power of the SEBI to collect from each of them a registration fee under Section 12 (2) of the SEBI Act. While negativing that challenge, the Supreme Court took note of the recommendation of the Expert Committee appointed by the SEBI that there should be a change brought about in the definition of "annual turnover". In para 47 of the judgment it was observed as under: "47. Therefore, it would be futile to contend that the impugned fee merely because....
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.... determining the levy and mode of payment of the registration fee by the stock brokers to the SEBI. This was a first-time exercise for both the SEBI and various stock exchanges. The manner of calculation of turnover data was an obviously cumbersome one. SEBI itself quickly realized that the verification of the turnover figures submitted by the various brokers to the stock exchanges and in turn by the stock exchanges to the SEBI was not going to be a simple exercise. This explains why there were several circulars and clarifications issued by the SEBI from time to time including the one concerning "fee continuity benefit" to such of those stock brokers who had converted their individual membership into a corporate membership. 29. The bone of contention is the circular dated 10th October 2003 whereby SEBI gave a final deadline of 31st October 2003 for submission of the turnover data on the basis of which the fee liability was to be calculated. It was stipulated that if the brokers did not submit the breakup turnover data by the deadline that they would not be eligible for concessional rates and a fee at a flat rate of 0.01% would be levied on the gross turnover. 30. Clause (bb) is a....
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....o revise its own data. This measure is absolutely necessary to ensure that the process of data revision does not remain open ended for even. As sufficient advance notices and reminders have been sent to the Exchanges/stock brokers and the Board is taking on record the latest turnover data duly certified by the Exchange, no representations/complaints would be entertained by the Board." 33. As far as the present case is concerned, no fault can really be found with the individual brokers if, DSEAL"s first set of auditors, M/s. K.C. Khanna & Co. failed to furnish the date in the correct format. The revised data, as prepared by M/s. Doogar & Associates was submitted before the regularization period came to an end i.e. 15th November 2004. It is not in dispute that there was a delay in the submission of the correct turnover data. However, considering the facts and circumstances of the present case, where admittedly the initially data furnished did not meet the requirements of the SEBI Regulations, a lenient view ought to have been taken by the SEBI. In para 20 of the counter affidavit, SEBI has acknowledged that there were instances, where on account of Court orders or otherwise, the del....