2008 (5) TMI 415 - SC - Companies Law

Fee continuity benefit - whether under the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 a fee is required to be paid by the stock brokers? Held that - Appeal dismissed. By clear interpretation of the Regulations, it is abundantly clear that no provision of succession to registration is permissible. Nikhil K. Vakharia son of Late Shri Kanchanlal K. Vakharia in order to operate in the stock exchange has to obtain a fresh registration from the SEBI and for the first five years, he would be required to pay the quantum of fee linked to the turnover and thereafter at the flat rate of Rs. 5,000 in order to keep the registration in force.

Summary

Issues involved:
Interpretation of SEBI regulations regarding fee continuity benefit in cases of transmission.

Detailed Analysis:
The judgment involved a batch of appeals concerning the issue of fee continuity benefit under the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992. The main question for adjudication was whether fee continuity benefit should be granted in cases of transmission within the same entity. The appellant argued that on account of transmission, they should not be required to pay turnover-based fees for the remainder of the initial five-year period, claiming continuity benefits. The SEBI, represented by Mr. Altaf Ahmed, contended that there was no provision in the SEBI Act, Rules, or Regulations recognizing registration by inheritance or transmission for fee continuity benefits. The SEBI emphasized that fee continuity benefits were only available in specific cases, such as corporate entity conversion, as outlined in Schedule III under Regulation 10 of the Regulations.

Mr. Ahmed further argued that SEBI regulations required every stock-broker dealing in securities to be registered with SEBI and pay registration fees as per the prescribed schedule. He highlighted that membership of a stock exchange was a privilege, not a right, and could not be claimed as inheritable. Additionally, he pointed out that SEBI had applied a turnover regime during a specific period and charged flat rates accordingly. The SEBI's stance was that the appellant, as a successor to a deceased member, needed to obtain fresh registration and pay the requisite fees to operate in the stock exchange.

The judgment delved into the specifics of the case, emphasizing that no provision allowed for succession to registration under the SEBI regulations. It was concluded that the appellant, as the son of the deceased member, had to secure a new registration from SEBI and comply with the fee structure outlined in the regulations. The court, after analyzing the relevant provisions of the Act, Rules, and Regulations, dismissed the appeal, ruling that it lacked merit.

Furthermore, the judgment disposed of other related appeals in line with the decision made in the primary appeal. The parties were directed to bear their own costs in all the appeals based on the circumstances of the case.