9911796707
TMI Blog2015 (11) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... ior to April 01, 1997 are entitled to the fee continuity benefit in terms of paragraph 4 of Schedule III ....". Since the SAT answered the question in favour of the stock brokers (the respondents herein), SEBI is in appeal. 3. The basic facts are common in all the matters inasmuch as the concerned broker was previously member of the Bombay Stock Exchange (for short, 'BSE') in his individual capacity or as a partnership firm. He opted to form a corporate entity under the provisions of the Companies Act 1956 prior to April 01, 1997 and carried on the brokers' business under the name and style of new corporate entity by getting its membership converted through approval of BSE leading to registration by the SEBI as a corporate entity. Undoubtedly, no stock broker or sub-broker can buy, sell or deal in securities unless it is granted Certificate of Registration by SEBI under the Regulations and for that, ordinarily the stock broker is required to pay the requisite fees in the manner provided in the Regulations. In particular, Regulation 10 provides that every applicant eligible for the grant of a certificate shall pay such fees and in such manner as is specified in Schedule III to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed to be in continuation of the old entity and no fee shall be collected again from the converted corporate entity for the period for which erstwhile entity has paid the fee as per the regulations. 4A. ...... ...... ...... 5. If a stock broker fails to remit fees in accordance with Paragraphs 1 and 2, he shall be liable to pay interest at 15% per annum for each month of delay or part thereof. Provided that the liability to pay interest as aforesaid may be in addition to any other action which the Board, may take as deemed fit against the stock broker under the Act, or the Regulations. Provided further ...... ...... ...... II. ...... ...... ...... III. Manner of Fees to be paid. The fees specified above shall be paid on or before the 1st day of October each year payable by draft in favour of "The Securities and Exchange Board of India" at Bombay, or at the respective regional office". 5. Case of the SEBI is that since Para 4 of Schedule III was introduced by an amending notification dated 21.1.98 which states in Para 2 that the amendment will be effective from the date of notification i.e, 21.1.98, the annual fee payable by registered brokers would rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless that effect cannot be avoided without doing violence to the language of enactment." Similar view was expressed in the case of Mahadeolal. 8. Reliance was also placed upon a Constitution Bench judgment in the case of K.S. Paripoornan v. State of Kerala & Ors., (1994) 5 SCC 593. There the issue related to retrospectivity but in an entirely different context of whether there must be clear intendment in the law if an amendment dealing with substantive rights is to apply to pending legal proceedings, initiated prior to the commencement of the amending Act. The majority held that the intendment in such a situation must be in clear terms. In the case of C. Gupta v. Glaxo- Smithkline Pharmaceuticals Ltd., (2007) 7 SCC 171 the Court, in the context of benefits under the Workmen's Compensation Act, reiterated the well established law that an enactment in order to be read as retrospective, must have an express provision to that effect or same effect must flow by necessary implication or intendment. 9. The aforementioned case laws have been noticed out of deference to the submissions but in fact they do not serve much purpose because the law governing the field is otherwise also quite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uage of paragraph 4 is decisive and that led to the decision under appeal against SEBI. According to him even if some amount of ambiguity is found in the relevant provision then the interpretation which is favourable to the brokers needs to be adopted. He further made a distinction between power to a levy duty or fee and the power of collection. According to him a competent authority, in this case SEBI, can decide for itself whether to proceed with collection or not. Embargo on collection, according to him, is clearly prospective in the present facts. 11. On behalf of respondents reliance was placed upon judgment in the case of Mathuram Agrawal v. State of Madhya Pradesh (1999) 8 SCC 667 wherein, in the context of municipal taxes, this Court held that the intention of the Legislature in a taxing statute is to be gathered from the express language particularly where it is plain and unambiguous. It is not permissible to add or substitute words for giving a meaning to such statutes for the purpose of serving the perceived spirit or intention of the Legislature. Reliance was also placed upon Somaiya Organics (India) Ltd. v. State of U.P. (2001) 5 SCC 519 for supporting the submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he regulations." 14. Reliance was placed upon judgments in the case of K.P. Varghese v. Income Tax Officer Ernakulam (1981) 4 SCC 173 and also in the case of Commissioner of Sales Tax, U.P. v. Indra Industries (2000) 9 SCC 66 in support of the submission that the Press Release may not be having statutory effect but it helps in understanding the intention of SEBI Board which issued the Release. In other words, the respondents sought to rely upon the principle of contemporanea expositio as propounded in the case of K.P. Varghese. In Indra Industries the circulars issued by the Income Tax Department were held to have binding effect upon the taxing authorities though it may not be binding on the courts or on the assessee. 15. For highlighting the general principles concerning retrospectivity of a statutory Act, Rule or notification, Mr. Divan relied upon a Constitution Bench judgment in the case of CIT v. Vatika Township (P) Ltd., (2015) 1 SCC 1. In paragraphs 27, 28 and 29 the Court recollected the clear legal position agreed to by the parties and thereafter some exceptions as to when and why the general rule against retrospectivity is inapplicable, was pointed out in paragraph 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and declarations granting benefits even from a retrospective date cannot be held bad in law in view of law noticed and laid down in Vatika case. The matter could have been different if SEBI had attempted to impose liabilities or create obligations upon stock brokers from a retrospective date. In case of conferment of benefits, no vested rights are adversely affected and in such cases retrospective operation is protected and permissible on the principles noticed in Vatika case. 17. In reply Mr. C.U. Singh referred to policy circular dated 28.3.2002 which inter alia states that pursuant to a judgment of this Court dated 1.2.2001 directing SEBI to amend the Regulations in light of recommendations of the R.S. Bhatt Committee report, SEBI had examined representations from the brokers and issued clarifications contained in part A of the circular. Part A, inter alia, contains a clarification in respect of applicability of the notification on exemption from fees on corporatization. The clarification reads thus "the spirit behind notification dated 21.1.1998 was to give benefit of this amendment to stock brokers who have converted their individual stock partnership membership into corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is to put an embargo on collection in future, in case the converted corporate entity is found entitled to the benefits of fee continuity. Such embargo is clearly to operate prospectively even if there existed some kind of liability in the past on account of fees leviable prior to insertion of paragraph 4 of Schedule III to the Regulations. In any case the rationale in not permitting retrospective operation of laws is only to ensure that subjects are not adversely affected by creation of legal liabilities and obligations for a period already bygone. In the present case the provisions do not create any obligation or liability. They only confer benefits by way of fee continuity on account of fees already paid by the earlier entity before its conversion into a new corporate entity. 20. Even if we were to apply the test of fairness, no exception can be taken to extention of the benefit of fee exemption as provided by the relevant provision in the Regulations. Since the policy behind grant of benefits is to encourage corporatization of individual or partnership members of a stock exchange, the action of extending such benefits without any curb on the basis of date of conversions ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
