2010 (4) TMI 602 - HC - Companies Law

Whether word turnover meant not what had been stated in the said regulation, but the net amount receivable after day s transaction, should be treated as turnover for the purpose of levying registration fee? Held that - We failed to understand why the principle of best judgment in this case is sought to be made applicable. It is misplaced argument, therefore, decisions cited in support of the aforesaid is not required to be discussed nor to be dealt with. We, therefore, hold that the learned trial Judge has correctly held that the said portion of the scheme asking providing for levy of 0.01 per cent in default of furnishing the turnover data ultra vires Act and Regulation and this portion is severable from the scheme itself. Dispose of these matters allowing the writ petitioners to furnish turnover data within a period of 4 weeks from the date of receipt of this order and no receipt of the same SEBI will consider to receive the same without realising any aforesaid payment of registration fee at a flat rate of 0.01 per cent and will process the same at the rate as stipulated in the Regulations and also calculate the interest leviable at the specified rate. The SEBI will consider whether a concession of reduction of interest should be allowed or not.

Summary

Issues Involved:
1. Entitlement of writ petitioners to the benefit of the Securities and Exchange Board of India (Interest Liabilities Regularisation) Scheme, 2004.
2. Legality of the provision for levying a flat rate of 0.01% registration fee in the scheme.

Issue-Wise Detailed Analysis:

1. Entitlement of Writ Petitioners to the Benefit of the Scheme:

The writ petitioners, represented by the Stock Brokers Welfare Association of India, sought relief under the Securities and Exchange Board of India (Interest Liabilities Regularisation) Scheme, 2004. They argued that they were prevented from submitting turnover data and paying registration fees due to the status quo order in a previous writ petition. The court found that the SEBI's actions did not violate the status quo order, as the order only applied to the payment of registration fees related to the interpretation of "turnover" and punitive measures, not to the issuance of notifications for turnover data submission. The court held that the writ petitioners had knowledge of the scheme but failed to act within the stipulated time, thus disqualifying them from the benefits of the scheme. The court upheld the trial judge's decision that the petitioners were not entitled to the scheme's benefits due to their inaction and lapse.

2. Legality of the Provision for Levying a Flat Rate of 0.01% Registration Fee:

The SEBI had introduced a provision in the scheme to levy a registration fee at a flat rate of 0.01% on gross turnover if brokers failed to submit turnover data within the stipulated time. The court examined whether this provision was ultra vires the SEBI Act and Regulations. The trial judge had declared this provision ultra vires, and the appellate court upheld this decision. The court reasoned that the SEBI's power to levy fees must align with the existing regulations, which already prescribed penalties for non-payment of registration fees. The court found that the flat rate provision conflicted with the regulatory framework and was not permissible under the law. The court emphasized that actions must be consistent with the statutory provisions, and any deviation or additional measures must not contradict the established regulations.

Conclusion:

The court concluded that the writ petitioners were not entitled to the benefits of the SEBI scheme due to their failure to act within the prescribed time, despite having knowledge of the scheme. Additionally, the court upheld the trial judge's declaration that the provision for levying a flat rate of 0.01% registration fee was ultra vires the SEBI Act and Regulations, as it conflicted with the existing legal framework. The court directed the SEBI to allow the petitioners to submit turnover data and consider their registration fee payments without applying the flat rate, while also considering the possibility of reducing interest liabilities sympathetically.