Jun 15, 2006
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Orders :
Orders of SAT
IN THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No: 392 of 2004
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Date of Decision
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15/06/2006
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Jitendra J. Bhabhera
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…..Appellant
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Versus
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1. Securities & Exchange Board of India.
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2. The Bombay Stock Exchange
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….Respondents
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Mr. Bharat Merchant, Advocate for the appellant
Mr. Dipan Merchant, Sr. Advocate with Mr. U.N. Das, Advocate for respondent no.1.
None for respondent no.2.
CORAM
Justice N.K. Sodhi, Presiding Officer
R.N. Bhardwaj, Member
Per: Justice N.K. Sodhi, Presiding Officer (Oral)
Whether a certificate of registration granted by the Securities and Exchange Board of India (for short “the Board”) under Section 12(1) of the Securities and Exchange Board of India Act, 1992 (hereinafter called “the Act”) relates back to the date of application is the short question which arises for our consideration in this appeal filed under Section 15T of the Act. Since the question is purely legal and depends upon the interpretation of Section 12(1), facts in so far as they are relevant may be stated in brief.
2. The appellant before us is a stock broker who has been carrying on his business as such since February, 1986. There was no provision for the registration of brokers at that time and no registration certificate was necessary prior to the establishment of the Board. The Act came into force with effect from 30/01/1992 and the Board was established thereafter. Section 12(1) of the Act provides that no stock broker shall buy, sell or deal in securities except under and in accordance with the conditions of a certificate of registration obtained from the Board in accordance with the Regulations made under the Act. The first proviso is relevant for our purpose and is reproduced hereunder for facility of reference:
“Provided that a person buying or selling securities or otherwise dealing with the securities market as a stock broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who may be associated with securities market immediately before the establishment of the Board for which no registration certificate was necessary prior to such establishment, may continue to do so for a period of three months from such establishment or, if he has made an application for such registration within the said period of three months, till the disposal of such application.”
3. A reading of the proviso leaves no room for doubt that the intention of the legislature was to maintain continuity. Persons who were working as brokers prior to the establishment of the Board were allowed to be continue their broking business for a period of three months after the Board was established and if during that period the broker made an application for registration he was allowed to continue till the disposal of the application. The application could be allowed and in that event the certificate of registration would be granted. The application could also be rejected if the applicant did not satisfy the requirements of law and in the opinion of the Board was not a fit and proper person or for any other valid reason. The object is clear. Brokers who were carrying on business prior to the establishment of the Board were allowed to continue without interruption till such time their application for registration was decided. The appellant before us had been carrying on his broking business since February, 1986 and on the establishment of the Board, he filed on 18/05/1992 an application for registration as a broker through the Bombay Stock Exchange. He deposited a sum of Rs. 5,000/- as application fee and the certificate of registration was granted to him on 3/12/1993. Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 (for short “the Regulations”) were framed by the Board which provide for registration of brokers. Regulation 10 provides that every applicant eligible for the grant of a certificate shall pay such fees and in such manner as specified in Schedule III. Paragraph (1) of this schedule deals with the fees to be paid by the stock brokers. According to this paragraph where the annual turn over of a stock broker does not exceed Rs. 1 crore during any financial year, he is required to pay a sum of Rs. 5,000/- for each financial year as the registration fee. If the annual turn over exceeds Rs. 1 crore during any financial year then a sum of Rs. 5,000/- plus one hundredth of one percent of the turnover in excess of Rs. 1 crore for each financial year has to be paid as the fee. Clause (c) of paragraph (1) which is relevant for our purpose reads thus:
“(c) after the expiry of five financial years from the date of initial registration as a stock-broker, he shall pay a sum of rupees five thousand for every block of five financial years commencing from the sixth financial year after the date of grant of initial registration to keep his registration in force.”
The aforesaid clause provides for payment of fee by stock brokers to keep their registration in force. According to this clause a stock broker shall pay a sum of Rs. 5,000/- for every block of five financial years commencing from the sixth financial year after the date of grant of initial registration to keep his registration in force. This clause obviously comes into play after the expiry of five financial years from the date of initial registration. The question before us is whether the registration certificate which was granted to the appellant on 03/12/1993 should relate back to the date of his application so that the block of five financial years should commence from 18/05/1992. In other words, should the block of five years commence from 18/05/1992 or 03/12/1993 is the question for our consideration. The answer to this question is contained in clause (c) of paragraph 1 of Schedule III to the Regulations which has been reproduced above. It clearly states that the block of five years will commence from the sixth financial year after the date of grant of initial registration. The appellant was initially registered as a broker on 03/12/1993 and therefore the period of five years will commence from this date. There is no provision in the Act or in the Regulations which would suggest that the certificate of registration once granted will relate back to the date of application. The first proviso to Section 12 of the Act indicates that the certificate of registration will not relate back. The said proviso as already been reproduced herein above and we have observed that it provides for continuity and a broker who was in broking business prior to the establishment of the Board should continue without registration till such time his application is decided. When it is decided and granted the certificate will begin to operate with effect from that date. In this view of the matter we are clearly of the view that the appellant cannot claim that his certificate of registration should relate back to the date of his application and that the block of five years should commence from 18/05/1992. The said period will commence from the date of his certificate.
4. No other point was raised.
5. In the result we find no merit in the appeal and the same stands dismissed.
Sd/-
Justice N.K. Sodhi
Presiding Officer
Sd/-
R.N.Bhardwaj
Member