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TMI Blog2015 (12) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of law under the 1957 Rules is directed towards the desired end and not concerned with the means, and it would be wrong for us to ascribe otherwise. We thus set aside the impugned Judgment of SAT and direct that the Appellants be given the benefit of fee continuity. These Appeals stand allowed accordingly. - Civil Appeal No. 3682 of 2006 - - - Dated:- 9-12-2015 - Vikramajit Sen And Shiva Kirti Singh, JJ. JUDGMENT Vikramajit Sen, J. Civil Appeal No. 3682 of 2006, Civil Appeal No. 3686 of 2006 And Civil Appeal No. 6394 of 2009 1. These Appeals arise against the common Judgment of the Securities Appellate Tribunal ( SAT for brevity) which affirmed the stance of SEBI refusing to grant fee continuity benefits to the Appellants herein. Common question of law and facts arise and for the sake of convenience we shall keep in perspective the factual matrix in Civil Appeal No. 3682 of 2006, in which the arguments in the main have been addressed. 2. Premium Capital Market Investments Pvt. Ltd. was incorporated on 24.6.1992, which on 9.2.1994 changed its name to Premium Capital Market Investments Ltd (hereinafter PCMIL , Appellant No. 3). On an application for Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to initiate steps to segregate it within two months. Alternatively the Committee also advised that PCMIL could set up a separate subsidiary to take up the broking activity. 5. On 30.9.2002 SEBI issued a Circular on Fee Continuity benefits. The relevant portions of the Circular read as follows: TRANSFER OF MEMBERSHIP TO 100% SUBSIDIARY, GROUP COMPANY, HOLDING COMPANY, ETC. Where brokers are forced by compulsion of law to transfer their membership to:- i. 100% subsidiary company or ii. Group company or iii. holding company they shall not be required to pay fees afresh. In such cases, the Exchange would have to enumerate the circumstances under law resulting in the said transfer to 100% subsidiary/group/holding company for consideration by SEBI. For this purpose, A company would be classified as a group company of another company, if the controlling persons/entities in both the companies are same i.e. such persons/entities hold atleast 51% of the paid-up capital (40% in case of listed company) in both the companies. A Company would be classified as a holding company of the trading member corporate, if its shareholding in the membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the two essential conditions are satisfied. First that the company to which the transfer was made is indeed a 100% Subsidiary Company, Group Company or a Holding Company and secondly, whether there was a compulsion of law to transfer the said membership. There are no disputes on the satisfaction of the first essential condition. Thus we find the sole question for determination before us to be whether there was a compulsion of law to transfer the membership to PGSL. 9. Mr. S Ganesh, learned Senior Counsel for the Appellant, has relied on Ratnabali Capital Markets Ltd. v. Securities Exchange Board of India (2008) 1 SCC 439, where the term compulsion of law for the first time came to be discussed in light of the SEBI Circular dated 30.9.2002. The appellants in Ratnabali Capital Markets Ltd. underwent an amalgamation in order to increase their reserves and qualify themselves to enter the derivatives market. On the prevailing facts it was held that raising money to qualify for membership of a segment did not constitute a compulsion of law for the said merger. Mr. Ganesh submitted that in Ratnabali Capital Markets Ltd. this Court clearly demarcated that any action taken by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that for an action to be compulsion of law, it needed to have been an alternative to liquidation or a correspondingly calamitous situation, essentially to prevent windingup. 11. To these submissions, Mr. Sameer Parekh responded by placing forth on record a copy of the original advertisement placed in the newspapers calling for applications for Trading Membership of the Capital Markets Segment of NSE. He points out that this advertisement was published on 11.2.1994 and the last date for submitting applications was 25.2.1994, leaving a gap of merely 14 days. He states that this becomes relevant in light of the submissions placed on record by SEBI that only those companies who had no other business involving financial liabilities could apply. He submits that SEBI could not have had the expectation that new companies would be incorporated and be ready with their applications for trading membership all within a span of 14 days. He also submitted that Rules 8(4) and 8(4A) are the provisions relevant to companies and on a reading of 8(4A)(iv) which specifically exempts the Directors of the companies from the provisions of 8(1)(f) and 8(3)(f) it can be concluded that it was not intend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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