2005 (10) TMI 283 - HC - Companies Law

Summary

Issues Involved:
1. Validity of SEBI's cut-off date for submitting turnover data with auditors' certificates.
2. SEBI's authority to impose conditions for concessional rates of fees.
3. Legality of SEBI's Interest Liability Regularisation Scheme, 2004.

Issue-Wise Detailed Analysis:

1. Validity of SEBI's Cut-Off Date for Submitting Turnover Data with Auditors' Certificates:
The petitioners challenged the cut-off date set by SEBI for submitting turnover data with auditors' certificates, arguing it was arbitrary and not prescribed under SEBI Regulations, 1992. The Court observed that SEBI issued multiple circulars extending the deadline from 15-7-2002 to 31-8-2003, and approximately 60% of the members complied. The Court held that cut-off dates are inevitable in such schemes and cannot be deemed arbitrary unless shown to be capricious or whimsical. The Court cited the Supreme Court's judgment in Union of India v. Parameswaran Match Works, emphasizing that the choice of a date is necessary and must be accepted unless it is very wide of the reasonable mark.

2. SEBI's Authority to Impose Conditions for Concessional Rates of Fees:
The petitioners argued that SEBI lacked the authority to impose conditions for concessional rates of fees, as prescribed in Paragraph Nos. 2 and 3 of Part-II of the SEBI Scheme, 2004. The Court noted that SEBI's scheme is optional and not obligatory under the Act, 1992 or Regulations, 1992. The Court emphasized that the scheme is a settlement scheme, not for adjudicating rights and liabilities but for regularizing dues. The conditions and concessions are interwoven and cannot be segregated. The Court cited the Supreme Court's judgment in Sanaboina Satyanarayana v. Government of AP, which held that conditions attached to a concession must be met to avail the benefit.

3. Legality of SEBI's Interest Liability Regularisation Scheme, 2004:
The petitioners contended that SEBI's scheme was contrary to the SEBI Regulations, 1992. The Court found that the scheme was floated under the powers conferred by sections 11(1), 11(2)(k), and 12 of the Act, 1992, and Regulation 10 of the Regulations, 1992. The scheme aimed to waive 80% of the outstanding interest on the condition that stock-brokers submit turnover data with auditors' certificates by a specified date. The Court held that the scheme is in consonance with the Act, 1992 and Regulations, 1992, and is a matter of policy. The Court cited the Supreme Court's judgment in Union of India v. Paliwal Electrical (P.) Ltd., which emphasized that policy decisions involving concessions or exemptions are within the government's discretion and should not be interfered with unless shown to be arbitrary or unreasonable.

Conclusion:
The Court dismissed the petitions, upholding the validity and legality of SEBI's Interest Liability Regularisation Scheme, 2004, including the cut-off date for submitting turnover data with auditors' certificates. The Court emphasized that the scheme is optional, and the conditions for availing concessional rates are reasonable and lawful. The Court discharged the rule with no order as to costs and vacated the interim relief granted earlier.