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TMI Blog2004 (4) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... e sum and substance of the grievance of the petitioner is that, the SEBI as well as the CSE upon giving wrong interpretation and/or meaning of the words annual turnover have been realizing astronomic and absurd amount of registration fees. 3. Mr. S.K. Kapoor, now the Additional Solicitor General, appearing with Mr. Ranjan Deb learned senior advocate appearing for the petitioner submits that the basis for the realization of registration fee is annual turnover , as defined in Schedule III to the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992. The petitioner is not challenging the validity of the annual turnover being a measure of the registration fees, but the construction and/or interpretation of the words annual turnover sought to be given by respondent Nos. 2 and 3. According to the petitioner, the true and plain interpretation of annual turnover , occurring in Schedule III to the said regulations is the net position of the sale and purchase transaction as on a given date. In other words, annual turnover will be the figure calculated on the basis of the difference between the amount received and receivable by the stockbroker fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the judgment of the hon ble Supreme Court of India B.S.E. Brokers Forum v. SEBI [2001] 104 Comp. Cas. 506 1 operating as a precedent and declaring a law under article 141 of the Constitution of India, vis-a-vis the subject-matter of the present writ petition. He argues that it is settled law that judgment of the hon ble Apex Court of India is an authority for a point, which is raised before it and is decided by it. It is also equally well settled that the judgment is authority for what it is decided and not what logically follows from it, and the judgment of the Supreme Court of India are not to be read as statute on Euclid s theorems. 6. Mr. Joyanta Mitra learned senior counsel appearing for the added respondent and supporting the writ petitioner has adopted argument of Mr. Kapoor and has also relied on the same decision cited by Mr. Kapoor, submits that while interpreting the statute the court should give true and clear grammatical expression employed in the section itself, in support of his contention he has relied on the following decisions of the Supreme Court: 7. Punjab Land Development Reclamation Corpn. Ltd. v. Presiding Officer, Labour Court [1990] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) paragraph 47, in particular. It would appear therefrom that the issue sought to be raised and/or argued in the present writ petition were also urged before the hon ble Supreme Court. This will appear from paragraph 4/pages 23, 25, 26, 28, 32-34, 41, 45, 46 and 48 of the transfer petition. Even in the written notes of argument filed on behalf of Mr. Ajit Dey and others claiming themselves to be the members of the CSE in the said transfer petition, it will appear that same contention was raised with the interpretation of turnover given by the Bhatt Committee is shocking. He has drawn my attention to the relevant portions of the transfer petition as well as the notes of argument, which have been filed with the leave of this court. 9. He further contends that in the notes of argument it was conceded that the said Act is a beneficial piece of legislation and they did not attempt to argue with the SEBI does not have competence to levy such fees. It was argued that the definition of turnover which was sought to be given by SEBI would lead to very anomalous situation without having any rational and legal basis. In terms of the recommendation of the Supreme Court as referred to in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such derivative segment. In any event, the CSE does not have any derivative segment and as such annual turnover on such derivative segments in the CSE could not and does not arise. Issues raised in this hearing were directly and substantially at issue before the hon ble Supreme Court, as would appear from the pleading of the note of arguments disposed of by the proceedings. In view thereof he contends with emphasis, that the principles of res judicata and/or constructive res judicata is applicable and the writ application is liable to be dismissed being barred by this principle. In this connection he has relied on the following decisions of the Supreme Court as well as this court: 14. Smt. Somawanti v. State of Punjab [1963] 33 Comp. Cas. 745, T. Govindaraja Mudaliar v. State of Tamil Nadu AIR 1973 SC 974, Makhan Lal Waza v. State of J K AIR 1971 SC 2206, Shenoy Co. v. CTO [1985] 155 ITR 178, G.K. Dudani v. S.D. Sharma AIR 1986 SC 1455, Union of India v. Nanak Singh AIR 1968 SC 1370 and Molina Ghosh v. State of West Bengal [1988] 2 CLJ 20. 15. Moreover, the writ petitioner is guilty of the suppression of material fact as in the earlier wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enged on the principal ground that the fees sought to be levied under regulation 2 read with section 11 is ultra vires the provision of article 265. The grounds for challenge in all the courts were common, so, a transfer petition was made by respondent No.2 before the hon ble Supreme Court for withdrawal of all the cases and consolidated hearing. Thereafter, the writ petition filed in the Bombay High Court was withdrawn. However, hearing of other writ petitions were stayed, but liberty was granted to all the parties therein to intervene in the transferred petition, and all questions raised in all the petitions were decided by the hon ble Apex Court once for all on 1-2-2001. The said transferred petition was disposed of along with the application under article 139A of the Constitution of India, filed before the hon ble Supreme Court of India being W.P. (C) No. 502 of 2000. This decision was reported amongst others in BSE Brokers Forum v. SEBI [2001] 104 Comp. Cas. 506 1 . This writ petition is a post Supreme Court judgment event. 21. Mr. Hirak Mitra, learned senior counsel appearing for respondent No.2, has contended before me that all the points which are much agitated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot specifically dealt with, but the Supreme Court decided the point, Therefore, it will be hit by the principle of res judicata . 25. In the case of T. Govindaraja Mudaliar v. State of Tamil Nadu AIR 1973 SC 974, the Supreme Court following the observation made in this connection in case of Smt. Somawanti v. State of Punjab [1963] 33 Comp. Cas. 745, the Apex Court applied the principle of res judicata in a writ petition while dealing with a case under the Motor Vehicles Act, 1939. In paragraph 10 of the said judgment, it has been observed amongst other that: "It is common ground in the present cases that the validity of Chapter IV-A of the Act has been upheld on all previous occasions and merely because the aspect now presented based on the guarantee contained in article 19(1)( f ) was not expressly considered or a decision given thereon will not take away the binding effect of those decisions on us." (p.978) 26. In the case of Shenoy Co. v. CTO [1985] 155 ITR 178, the Supreme Court in paragraph 16, considering other decisions of the Supreme Court, has been observed that: "...that the law laid down by the Supreme Court is binding on all, notwithstanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the persons so litigating. But it is only when the conditions of Explanation VI are satisfied that a decision in the litigation will bind all persons interested in the right litigated. The onus of proving the want of bona fides in respect of the previous litigation is on the party seeking to avoid the decision. The words public right have been added in Explanation VI in view of the new section 91 of the Civil Procedure Code and to prevent multiplicity of litigation in respect of public right. In view of Explanation VI it cannot be disputed that section 11 applies to public interest litigation as well as but it must be proved that the previous litigation was the public interest litigation, not by way of a private grievance. It has to be a bona fide litigation in respect of a right which is common and is agitated in common with others." (p.398) 29. In the Calcutta decision rendered in the case of Molina Ghosh v. State of West Bengal [1988] 2 CLJ 20 the Division Bench of this Court has applied the principle of constructive res judicata in writ proceedings. In paragraph 25 of the said judgment, it has been observed amongst others by the Division Bench that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration fee by its very nature can only be onetime fee, hence, a demand for collection based on annual turnover extending over five years is arbitrary and unreasonable...."(p.514) 33. The contention has been raised here that the meaning of expression of the words annual turnover being given by respondent No.2 is arbitrary and excessive and further the same was not dealt with by the Supreme Court. I am unable to accept this contention of the petitioner as urged by Mr. Kapoor, that this question needs to be decided by this Court. Firstly, because the argument was advanced before the Supreme Court in my view covering all aspects of the matter though not specifically agitated as to the interpretation and meaning of the said definition of annual turnover, but could be or ought to have been agitated. Accordingly, this point is hit by the principle of constructive res judicata as by this time this principle has been applied in the writ proceedings and indeed the Supreme Court has applied so and in particular this hon ble Court has in clear terms held that the points that could have been raised and was not raised cannot be allowed to be raised once again even by the person who was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Committee, we are of the opinion that the Board is bound to bring about corresponding changes so as to remove the anomalies pointed out by the Committee. This was pointed out to learned counsel for the respondents when it was submitted that the Board has accepted these recommendations and the proposed changes were not brought about because of the pendency of this petition and the necessary changes to incorporate the recommendations of the Bhatt Committee would be done after disposal of these petitions. We record this submission on behalf of the Board and direct that the said changes recommended by the Bhatt Committee will be incorporated in the regulations. Subject to the above, we are of the view that the challenge made to the levy based on the measure of turnover has to be rejected." (p.530) 34. It appears in the said case the Bombay High Court by an interim order before the transfer of that case was effected, appointed a Committee headed by justice A.N. Modi (retd.) to deal with the same subject, Justice Modi Committee report was also furnished and the same has been annexed to this petition. In my view the Modi Committee report has not been accepted by the Hon ble Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhatt Committee has not decided the question as to the interpretation and meaning of annual turnover which has been mentioned in vague terms in Schedule III of regulation 10. In my view this submission has to be considered in the context of the petitioner s contention before the Supreme Court that the Bhatt Committee report has been accepted, and indeed the Bhatt Committee report has not been challenged here, and there is no scope either to do so at the present moment. In view of the aforesaid Supreme Court decision the petitioner cannot get out of the scope and purview of the Bhatt Committee report in relation to the question raised in this writ petition. Therefore, it has to be examined whether any expression turnover has been explained in this report to bring about the solution of the problem raised by the petitioner. The report of the Committee has been annexed being annexure P3 at page 63. The Bhatt Committee has dealt with very elaborately the meaning of turnover, the relevant and pertinent portion thereof is quoted hereunder: "2.1 The terms of reference of the committee require it to go into the various competents to turnover. However, questions regarding reasonablenes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not brokerage alone. The turnover based fees are charged every year and are being collected from 1935 on a perennial basis whereas, under SEBI Regulations fees would be payable by any broker for a period of initial five years only and thereafter a nominal sum of Rs. 1,000 per annum is payable by each broker." 37. After explaining as above the Bhatt Committee ultimately in this context recommended that the turnover is lawful and reasonable basis for payment of registration fee. This practice of levying fees based on annual turnover, is well established in countries like USA. Ultimately it has been concluded that the basis of annual turnover is not unreasonable. 38. It is said in the affidavit in opposition in terms of the Supreme Court direction respondent No.2 has brought about certain changes and Regulation has been amended accordingly by issuing a clarification regarding fees payable by the stockbrokers on 28-3-2002, the notification has not been challenged. Under this circumstances, I think this court has nothing to touch on the subject. In view of acceptance of the report of the Bhatt Committee the interpretation of the term annual turnover in reference to Schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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