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TMI Blog2008 (5) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... f convenience, the facts of Civil Appeal No. 4210 of 2006 are recapitulated. 2. This statutory appeal under section 15Z of the Securities and Exchange Board of India Act, 1992 ( the Act ) is directed against the order dated 12-5-2006 passed by the Securities Appellate Tribunal, Mumbai in Appeal No. 221 of 2004. 3. The impugned order is a one line order which makes a reference to the detailed order passed on 12-5-2006 in a companion matter titled as Kamlesh Ramanlal Shah v. SEBI [Appeal No. 211 of 2004, dated 12-5-2006]. 4. The question which calls for adjudication in this case is regarding fee continuity benefit . Under the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 ( the Regulations ) a fee is required to be paid by the stock brokers. Broadly, the fee was structured in two distinct phases, in the first five years of operation of a broker, the quantum of the fee was linked to the turnover of the stock broker. Greater the turnover, higher the fee. 5. The second phase comprised blocks of five years from the sixth financial year after the grant of initial registration. During each block period of five years, the stock broker was required to pay a flat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he SEBI (Stock-Brokers and Sub-Brokers) Rules, 1992 ( the Rules ) and subject to payment of registration fee for a new stock-broker as per the schedule fixed in the Regulations. He further submitted that there is no provision for grant of fee continuity benefit in cases of such transmission. The only situation under which fee continuity benefit is granted is under para 4 of Schedule III under Regulation 10 of the Regulations, which reads thus: "4. Where a corporate entity has been formed by converting the individual or partnership membership card of the exchange, such corporate entity shall be exempted from payment of fee for the period for which the erstwhile individual or partnership member, as the case may be, has already paid the fees subject to the condition that the erstwhile individual or partner shall be the wholetime Director of the corporate member so converted and such Director will continue to hold a minimum of 40 per cent shares of the paid-up equity capital of the corporate entity for a period of at least three years from the date of such conversion. Explanation . It is clarified that the conversion of individual or partnership membership card of the exchange int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the expiry of six months from the date on which such fees become due. (2) Where a stock-broker fails to pay the fees as provided in regulation 10, the Board may suspend the registration certificate, whereupon the stock-broker shall cease to buy, sell or deal in securities as a stock-broker." 11. Mr. Ahmed contended that in order to become a member of the stock exchange, the person is required to be qualified as per rule 8 of the Securities Contracts (Regulations) Rules, 1957. This right is also not inheritable, since every person on transmission may not even be qualified to become a member of a particular stock exchange. It is pertinent to mention here that membership of a stock exchange is a privilege and not a matter of right and thus this cannot be claimed as inheritable. 12. Mr. Ahmed also contended that SEBI has no discretion in implementation of the Act, Rules or Regulations and has to strictly adhere to the provisions as laid down and, therefore, has no power to waive the said requirement. It may also be relevant to mention that out of the 19 stock brokers who prayed for waiver of the fresh registration or new entities upon transmission, only 9 or 10 have come t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on s son or brother or father s brother or unmarried sister of brother shall not be taken into partnership unless he or she be in all respects eligible for membership of the Exchange." 15. It was contended by Mr. Ahmed that Late Shri Kanchanlal K. Vakharia alone was a member and through his partnership, the entire partnership firm was allowed to trade on the Bombay Stock Exchange, the entire turnover of trade on the Bombay Stock Exchange is relatable to the individual member Late Shri Kanchanlal K. Vakharia as otherwise the partnership firm and non-member partners would not have been able to deal in securities on the Bombay Stock Exchange. Consequently, this partnership firm could also not deal with securities unless the member of the stock exchange namely the individual member Late Shri Kanchanlal K. Vakharia gets registered with SEBI. It is through that individual member Late Shri K. Vakharia that the partnership firm and registered partners are able to deal in securities on the Bombay Stock Exchange. Even otherwise, the entire turnover of the partnership firm on the stock exchange is on securities and, therefore, relatable to the registered member i.e. Late Shri Kanchanlal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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