2004 (4) TMI 314 - HC - Companies Law

Summary

Issues Involved:
1. Interpretation of 'annual turnover' for calculating registration fees.
2. Application of the principle of res judicata.
3. Validity and legality of SEBI's method for calculating registration fees.
4. Impact of the Bhatt Committee and Modi Committee reports on the interpretation of 'annual turnover.'

Detailed Analysis:

1. Interpretation of 'annual turnover' for calculating registration fees:
The petitioner, a stockbroker, challenged the demand for registration fees levied by SEBI based on the interpretation of 'annual turnover' under Schedule III of the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992. The petitioner argued that 'annual turnover' should be interpreted as the net position of sales and purchases, i.e., the difference between the amounts received and receivable by the stockbroker and the amounts paid and payable. SEBI, however, calculated the fees based on the aggregate value of all sales and purchases during a financial year. The court found that the definition of 'annual turnover' in Schedule III is clear and means the total of sale and purchase prices of securities received and receivable by the stockbroker, thus rejecting the petitioner's interpretation.

2. Application of the principle of res judicata:
SEBI contended that the issues raised by the petitioner had been previously adjudicated by the Supreme Court in the case of BSE Brokers Forum v. SEBI, and thus, the principle of res judicata applied. The court agreed, stating that the Supreme Court had already addressed the validity and interpretation of the 'annual turnover' for the purpose of levying registration fees. Although the petitioner argued that the Supreme Court had not specifically dealt with the interpretation of 'annual turnover,' the court held that the principle of constructive res judicata barred re-litigation of issues that could have been raised earlier but were not.

3. Validity and legality of SEBI's method for calculating registration fees:
The court examined whether SEBI's method of calculating registration fees based on the aggregate value of sales and purchases was valid and legal. The court referred to the Supreme Court's acceptance of the Bhatt Committee's recommendations, which supported SEBI's method. The Bhatt Committee had concluded that the total volume of business, i.e., the price paid or received for securities, constituted turnover and that this method was reasonable and consistent with international practices. The court found SEBI's method lawful and reasonable, dismissing the petitioner's challenge.

4. Impact of the Bhatt Committee and Modi Committee reports on the interpretation of 'annual turnover':
The Bhatt Committee had recommended changes to the definition of 'annual turnover' and the quantum of fees, which were accepted by the Supreme Court and SEBI. The court noted that the Bhatt Committee's interpretation of 'annual turnover' as the total of sale and purchase prices was binding. The Modi Committee's recommendations, which suggested a different method, were not accepted by the Supreme Court for implementation. The court emphasized that SEBI had amended its regulations in line with the Bhatt Committee's recommendations, and the petitioner's interpretation was inconsistent with these accepted recommendations.

Conclusion:
The court dismissed the writ petition, upholding SEBI's interpretation of 'annual turnover' and the method for calculating registration fees. The principle of res judicata barred the re-litigation of issues already decided by the Supreme Court. The Bhatt Committee's recommendations, accepted by the Supreme Court and SEBI, were deemed binding, and SEBI's method was found lawful and reasonable.