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TMI Blog2005 (10) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... viz. "SEBI (Interest Liability Regularisation) Scheme, 2004" (hereinafter referred to as SEBI Scheme , for short) dated 15-7-2004 for the waiver of 80 per cent of the total interest liability of the share-brokers. The said Scheme was incorporated in exercise of the powers under sub-section (1) and clause ( k ) of sub-section (2) of section 11 read with section 12 of the Securities and Exchange Board of India Act, 1992 (hereinafter referred as the Act, 1992 , for short). The aforesaid Scheme was for regulation of interest liability in respect of Registration Fees payable by stock-brokers under the SEBI (Stock-broker and Sub-brokers) Regulations, 1992 (hereinafter referred as Regulations, 1992 , for short). The Scheme 2004 floated by SEBI is sort of concession, remission and rebate. Certain words of paragraph Nos. 2 and 3 of the part of the Scheme are under challenge. This part is highlighted and underlined in paragraph Nos. 2 and 3 of Part-II of the Scheme, which reads as under: "Part - II Manner of Taking Turnover Data on Record. 1.****** 2. The Board has followed up vigorously to obtain turnover data in respect of all brokers, past and present, for the relevant years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wide agitation of stock-brokers which resulted in closing down of Stock Exchanges throughout India for several days. A revision in the fee structure for registration of brokers had taken place. Further, two options were given and the fees was reduced and thereafter there was further reduction in the Registration Fees. Option A was for one time Registration Fees whereas option B was for payment of fees at the rate of 1 per cent (one per cent) of annual turnover of each broker for five years from 1990-1991. Aforesaid matter was challenged, including the validity of Regulation 10 of the Regulations, 1992 to be read with Schedule III before the Hon ble Supreme Court in case of B.S.E. Brokers Forum v. SEBI [2001] 3 SCC 482 1 , wherein the validity of the actions initiated by SEBI were upheld. Regulation 10 read with Schedule III of the Regulations, 1992 has been held as intra virus the Act, 1992. ( ii )Because of agitation by share-brokers and mainly for exclusion of certain transaction from turnover and to resolve other dispute as to Registration Fees, an Expert Committee was constituted which gave its report on 18-12-1992 (known as R.S. Bhatt Committee Report) and, SEBI adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry scheme. The conditions are attached with said scheme. If the conditions are fulfilled, the stock-brokers are entitled to get the concession from the payment of 80 per cent of outstanding interest upon the Registration Fees and the conditions are that: stock-brokers must submit the certificate of the auditor and bifurcated turnover data within the time limit framed by the SEBI to the Stock Exchanges. Initially, it was 15-7-2002, which was extended up to 10-4-2003 and thereafter further extended up to 31-8-2003. Through various circulars, SEBI intimated Stock Exchanges, who in turn informed Stock-Brokers, to supply the turnover data within time frame along with Auditors Certificate, otherwise, they will not be entitled to concession in the payment of interest and will not be entitled to concessional rate of fees as per clause ( bb ) of Paragraph (1) of clause ( I ) to Schedule III of the Regulations, 1992. Time and again, opportu- nities were given to the stock-brokers to supply the turnover data along with Auditors Certificate, but as the Auditors Certificate was not supplied, SEBI calculated the Registration Fees on the basis of turnover data supplied by the Stock Exchanges w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y kindly be quashed and set aside and necessary directions may be given to SEBI to accept the turnover data with break up given by the petitioners and to calculate the Registration Fees in accordance with Schedule III of the Regulations, 1992 to be read with Regulation 10 of Regulations, 1992. 7. I have heard Mr. Mihir Joshi, learned Senior Advocate appearing for SEBI, who has submitted that the Scheme floated by SEBI is optional. It is not compulsory for the stock-brokers to accept the said Scheme. It is not obligatory for the SEBI to float the Scheme, 2004 neither under the Act, 1992 nor under the Regulations, 1992. The learned Counsel for SEBI further submitted that the Scheme, 2004 has not changed the basic Scheme of the payment of Registration Fees. The R.S. Bhatt Committee had made certain suggestions for calculation of turnover and certain types of transactions were such that concessional rates ought to be prescribed, and this has been referred to in paragraph 47 of the judgment delivered by the Hon ble Supreme Court, as referred hereinabove, in B.S.E. Brokers Forum v. SEBI [2001] 3 SCC 482 1 . These suggestions have been incorporated in Schedule III of the Regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and again to the stock-brokers about the circulars issued by SEBI and, also intimated that bifurcated turnover by narrating different jobbing transactions, is required to be supplied by stock-brokers along with Auditors Report, failing which, they will not be entitled to concessional rate in respect of fees payable by them and the member will have to pay the fees at the rate of 0.01 per cent of the total turnover reported by Exchange to SEBI. One of such circular dated 1-4-2003 is at Page - 216 along with affidavit-in-reply filed by respondent No. 3. Similarly, Stock Exchange has also circulated, all the circulars issued by SEBI to the members of Respondent No. 3. It is also submitted by Ahmedabad Stock Exchange that those who have submitted bifurcated turnover along with Auditors Certificate, their data of turnover, with break up, has already been submitted to SEBI. There are approximately 60% of the members who have complied with the circulars. The Ahmedabad Stock Exchange has Gross Turnover data. SEBI insisted for Auditors Certificate and the break-up of the turnover of the stock-brokers for giving benefit of concessional rate of Registration Fees and therefore, those who ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the interest liability in respect of Registration Fees payable by stock-brokers under the Regulations, 1992. Initially, the Registration Fees fixed by SEBI was found excessive by stock-brokers. There was nation wide strike. An Expert Committee, under the Chairmanship of Mr. R.S. Bhatt, was set up by the Board to look into the interpretation of turnover in context of fees payable by brokers. It was observed by R.S. Bhatt Committee in its report dated 18-12-1992 that turnover, was fair basis, for determination of Registration Fees and the incidence of fees, prescribed by the Board was not unreasonable. It, however, recommended concessional rate of fees for certain types of transactions like one which is squared off during the same date and which have not been undertaken by the broker on behalf of his client or the transactions on behalf of Government securities, bonds issued by the Public Sector Undertakings or carried forward, renewal or Badla transactions or transactions in securities carried by brokers without reporting them to the Stock Exchange, trade put through other Stock Exchanges and for the activities such as underwriting and collection of deposits. For such type ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concession, remission or rebate is conditional one. There is no obligation upon SEBI neither under the Act, 1992 nor under the Regulations, 1992 to float a Scheme for awarding concession in the payment of outstanding interest and correspondingly, there is no legal right vested in the petitioners to get concession in the payment of interest . It has been held by Hon ble Supreme Court in Paragraph Nos. 10 and 11 in Union of India v. Aflon Engg. Corpn. [2001] 10 SCC 677, as under: "10. In matters of taxation it is not a right of anyone to claim exemption . Rule 8 gives the discretion to the Central Government to grant such exemption and to such items as it may think proper. In the present case, the Central Government had granted exemption from payment of excise duty, inter alia, to the manufacturers of flexible plastic sheets. The original notification of 1971 excluded right plastic sheets from the benefits of the exemption notification. As the respondent was unable to show that the plastic sheets manufactured by them were flexible, therefore, it claimed benefit of the notification. 11. The 1971 notification did not elaborate or specify as to what would be regarded as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 78, especially in paragraph 7 as under : "7. We have carefully considered the submission of the learned counsel appearing on either side. In our view, the rejection of the plea on behalf of the appellant by the High Court was well merited and supported by sound reasons. As pointed out earlier, the remission to be granted was in respect of only a specified class of convicts and that too subject to the conditions specified in the very government order. Consequently, the claim for remission cannot be made or countenanced de hors the specific conditions subject to which only it has been accorded and inasmuch as the grant as well as the conditions formed as compendious single common pattern or scheme of concession by way of remission, impregnated with a policy designed in public interest and the safety and interests of the society, either the remission could be availed of only subject to the conditions stipulated or the entirety of the scheme fails as a whole, and there is no scope for judicial modification or modulating the same so as to extend the concession in excess of the very objective of the maker of the order who seems to have been guided by considerations of State p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fees shall be computed at the rate of one hundredth of one per cent of the turnover; ( v )the trade put through on other stock exchanges shall be included in the turnover of that exchange if market for that security does not exist on the exchange of which he is a member and the fees shall be computed at the rate of one hundredth of one per cent of the turnover; ( vi )activity such as underwriting and collection of deposits shall not be taken into account for the purpose of calculating the turnover." Thus, concessional rates of fees has been prescribed for jobbing transactions, transactions in Government Securities, the Bonds issued by any Public Sector Undertaking, for carrying forward, renewal and Badla transactions, for carrying out transactions in securities without reporting them to the Stock Exchanges for the trade put through an other Stock Exchanges and for the activities such as underwriting and collection of deposits. Very nominal rates of fees have been prescribed under clause ( bb ) instead of regular rate i.e., 0.01 per cent, as per clause ( b ). Thus, clause ( bb ) has to be read in continuance with clause ( b ). In fact, clause ( bb ) is an exception or pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to in clause ( b ). Concessional rates are 0.001 per cent and 0.005 per cent, whereas normal rate is 0.01 per cent. ( vi )In the present case, Stock Exchange does not have bifurcated data of turnover of the concerned Stock-broker. Ahmedabad Stock Exchange is having Gross Turnover data for its members as per affidavits-in-reply filed by Ahmedabad Stock Exchange and therefore, the only option left out for the stock-brokers to get the benefit of concessional rates of calculation of the Registration Fees is, to supply bifurcated turnover data or turnover data with break-up, pointing out those exceptional transactions referred to in clause ( bb ) of clause (1) of Paragraph (I) of Schedule III along with certificate of Auditor on or before a particular cut off date. The claimants of concessional rates have failed to supply data on or before particular date and therefore, SEBI can calculate the Registration Fees at 0.01 per cent of the gross annual turnover data supplied by the Stock- Exchange as clause (1)( b ) of Paragraph (I) of Schedule - III of the Regulations, 1992. In absence of separate turnover for jobbing transactions, transactions in Government securities, Bonds issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... best judgment assessment so that there may not be any difference in the procedure to be adopted by different assessing authorities and uniform basis provided is always just, fair and reasonable so that the assessing authority will have a uniform and satisfied principle or procedure in that behalf." [Emphasis supplied] It is further observed in the said paragraph that when any method is uniform, which contains uniform instructions for the best judgment assessment, applicable fundamentally to all, is always just, fair and reasonable, so that Assessing Authority will have a uniform and satisfied principle or procedure in that behalf. In the present case also petitioners were given enough and sufficient opportunities to provide bifurcated data of their turnover and they have failed to produce the same along with Auditors Certificate as per clause (3) of Paragraph (I), of Schedule III of the Regulations, 1992. The SEBI has all the powers to calculate the Registration Fees at 0.01 per cent of the Gross Annual Turnover of the stock-brokers. These who are claiming the benefit of exception or proviso, have to prove exceptional facts, which are enumerated in exceptions or proviso i.e. i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces, looking to the nature of the Scheme, I am of the opinion that the conditions attached with the SEBI Scheme, 2004 are reasonable and cannot be labelled as capricious or whimsical. Seve-ral extensions have been given by SEBI and number of members of Ahmedabad Stock Exchange have availed the benefit of concessional rate of Registration Fees. It is held by Hon ble Supreme Court in Paragraph Nos. 8 and 10 of Union of India v. Parameswaran Match Works (1975) 1 SCC 305, as under : "8. ... There can be no doubt that any date chosen for the purpose would, to a certain extent, be arbitrary. That is inevitable. 9.**.******** 10. ... In the matter of the granting concession or exemption from tax, the Government has a wide latitude of discretion. It need not give exemption or concession to everyone in order that it may grant the same to some . As we said, the object of granting the concessional rate of duty was to protect the smaller units in the industry from the competition by the larger ones and that object would have been frustrated, if, by adopting the device of fragmentation, the larger units could become the ultimate beneficiaries of the bounty. That a classification can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be more charitable than the law or the Scheme floated from time to time under the law. Every such type of regularisation Scheme has its own wisdom. Whenever the State is procuring the public revenue, to which it is entitled under the Act, such loss to the public revenue (waiver of interest etc.) is supposed to be compensated in one format or another. To get prompt money, which is not paid, since decade, can be one of the considera-tions. In the economic or taxation sphere, a large latitude should be allowed to the legislature. An open-ended policy in such type of regularisation Scheme may not have been thought fit, by the legisla-ture. The word regularisation itself suggests that instead of long drawn disputes and non-payment of Registration Fees from 1992 onwards, with a view to get speedy recovery, the concession of 80 per cent of the interest on outstanding amount of the interest has been given. Therefore, cut off date, in such type of schemes is inevitable. Otherwise, there is no reason why in such case, the State should have given up the revenue, due to it, under the Act. The paragraph No. 10 of judgment delivered by the Hon ble Supreme Court in the case of Union o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy decision as reflected in para 3 of Notification No. 132/82 cannot be said to be arbitrary, unreasonable or inconsistent with statutory provisions, a person claiming the protection under the said notification has to comply with the conditions laid down in the notification. As the appellant has been granted benefit of rebate in excise duty as per para 3 of the notification, the action cannot be held unlawful and the appellant society has no reason to make grievance against the action of the Revenue." [Emphasis supplied] 10. As a cumulative effect of the aforesaid facts and circumstances of the case and the judicial pronouncements, the Scheme floated by SEBI viz., SEBI (Interest Liability and Regularisation) Scheme, 2004 is absolutely true, correct and legal and in consonance with the Act, 1992. Likewise, the calculation of registration fees, adopted by SEBI in absence of break-up turnover and in absence of Auditor s report before the cut off date, is true, correct, legal and in consonance with the Act, 1992 and Regulations, 1992. The Court cannot extend the benefit of the Scheme after the cut off date, especially in the facts of the present case, when enough extensions has b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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