AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (11) TMI 847
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....purpose of SEBI registration fees, (2) transfer of membership and fee continuity benefit, (3) interest on delayed payment of fees and (4) refund of excess fees paid, if any. 2. Pursuant to appeals before this Tribunal and further to the Hon'ble Supreme Court Issue No. 1 relating to what constitutes annual turnover for the purpose of SEBI registration fee has since been decided by the judgment of the Supreme Court dated November 24, 2015 and hence the appellant submits that this issue is now closed. Therefore, only the remaining three issues have been remanded by the Apex Court and which needs to be now decided in this appeal. 3. The relevant part of the order of the Apex Court is reproduced here under:- "As already noted, in the case of B.S.E. Brokers' Forum this Court directed the SEBI to incorporate the relevant recommendations of the Bhatt Committee in the Regulations and as a result the rate of fee on Government securities etc. dealt in the wholesale debt market was lowered and pegged at 1/10th in comparison to fees payable by the stock brokers in other segment. In view of the above discussions and the interpretation of the term 'annual turnover' indicated by us earli....
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....e 4, 1999 appellant submitted an amendment application for transfer of their existing membership. Vide this letter the revised shareholding was shown as 51% for Garban PLC and the remaining 49% for India Life Credit & Holding Pvt. Ltd. and the original applicant Pennar goes off the radar completely. (f) On July 1, 1999 the NSE conveyed approval of the proposed transfer of the shareholding subject to various conditions, notably including that no change in the shareholding of the trading member company Pennar without prior approval of the Exchange; execution of a fresh membership undertaking in an enclosed format; SEBI approval and submission of an undertaking singed by the new dominant shareholders / promoters to the Exchange / National Securities Clearing Corporation Ltd. (NSCCL) in respect of the present and future obligations / liabilities of the trading member company. This was further reiterated by NSE vide another letter dated February 14, 2000. On March 14, 2000 SEBI wrote to NSE relating to change in the shareholding pattern of Pennar that the proposal should be submitted along with all the documents relating to fresh registration. The appellant continued to press for tra....
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....n at the rate of 0.001%. (m) On August 28, 2003 the appellant submitted the auditor's certificate about the turnover as stated by NSE under protest and filed representations with SEBI. (n) Further, on August 29, 2003 the appellant made a payment of Rs. 2,42,23,762/- towards registration fee and interest calculated on the basis of the turnover stated by NSE without prejudice to the rights of the appellant. The appellant filed a Writ Petition in September 2003 before the Bombay High Court which was disposed of on September 18, 2003 directing SEBI to hear the appellant on the basis of their representations. Further, following a show cause notice relating to the turnover details and fee liability etc and after giving an opportunity of providing a fresh auditor's certificate in the prescribed format and after providing an opportunity of hearing on October 31, 2003 Chief General Manager, SEBI passed the impugned order on November 28, 2003. (o) On March 24, 2004 an appeal was filed against the said order of the Chief General Manger, SEBI before this Tribunal. (p) On December 6, 2004 this Tribunal passed an interim order staying the notice of payment subject to a further deposi....
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....cable to other segments at 0.01%. This is complete travesty of justice since it is an admitted fact by SEBI, NSE and the Bhatt Committee report that the rate applicable to WDM segment would be only 1/10 of the rate applicable to the other segments of the securities market because of the special nature of the WDM segment. It was further contended that it is an undisputed fact that the appellant operates only in the WDM segment as the registration certificate of NSE shows that the appellant does not deal in any other segment of the securities market. Further, when SEBI raised objections to the amount of turnover submitted by the appellant, the appellant adopted the turnover figures given by the NSE itself. Based on these figures Chartered Accountant's certificate was also given to SEBI as well as to NSE. However, only on a technical ground that the Chartered Accountant certificate was not in the prescribed format, the same was rejected and the turnover fee as applicable to other than WDM segment, which is ten times more than what is applicable to the WDM segment, has been imposed on the appellant arbitrarily and without any legal basis. 7. On the issue of interest liability, the le....
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....ntity continuing with the initial registration granted by SEBI. Citing the relevant circulars and the various correspondences between the appellant and NSE; NSE and SEBI and SEBI and the appellant and the interpretation as given in the impugned order, the learned Senior Counsel argued that it was always treated as a separate registration because the appellant had changed ownership and control in favour of Garban which initially owned 51% share capital of the appellant and subsequently acquired further equity. Pennar had completely exited from the company which is now under the control of Garban. Citing the relevant circulars he further emphasized that only partnership firms getting converted into corporate form were eligible for fee continuity benefit at the beginning which was later extended to cases of mergers and amalgamations but under a number of conditions. Appellant is neither a case of partnership getting converted into a corporate form nor a case of merger or amalgamation. As such, under the provisions of the relevant SEBI laws appellant is not entitled to the benefit of fee continuity. When a new registration was given this was legally made clear and thereafter the appell....
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....8, 2003 issued under SEBI (Broker Regulations) Rules, 1992 we cannot agree with the contentions of the appellant that they are entitled for fee continuity benefit treating the initial registration granted to Pennar on August 6, 1994. The correspondences and the relevant regulations make it very clear that the appellant has been rightly treated as a fresh registration with effect from the date of granting the new registration on October 20, 2000 and thereafter cannot indefinitely continue to claim that it is case of transferring some portion of equity to Garban and the original legal entity continues. It is a fact that original legal entity as a company continues but the question to be answered is whether for the purpose of granting registration as a broker 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 correspond....
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....78,29,623/- as on November 30, 2003. This means that the turnover could be crystallized in the impugned order as on that date. It is also on record and an admitted fact that the appellant was dealing only in the WDM segment. It is only on the ground that the Chartered Accountant's certificate was not in the prescribed proforma and therefore the exchange could not certify the details, SEBI has imposed the turnover fee at the rate of 0.01%. We find this approach of SEBI completely arbitrary and without any legal basis. When it is a fact that the appellant was dealing only in WDM segment and the turnover fee applicable to WDM segment was only 0.001% it was not appropriate for SEBI to impose a turnover fee at the rate of 0.01% thereby imposing such a huge burden on the appellant without any legal basis; which is highly arbitrary. If SEBI had any doubt regarding the turnover figures, being the regulator those doubts should have been removed before passing an order, particularly when the order imposes a very heavy burden on the appellant. When SEBI could calculate the fee liability based on the figures given by the appellant it was incumbent on SEBI to apply the applicable rate of fee ba....