May 31, 2006
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Orders :
Orders of SAT
IN THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No: 363 of 2004
Date of Decision 31/05/2006
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Salasar Stock Broking Limited
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…..Appellant
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Versus
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Securities & Exchange Board of India
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….Respondent
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Mr. Somasekhar Sundaresan, Advocate with Mr. Ashish Bhakta, Advocate and Mr. Bhushan Shah, Advocate for the appellant
Mr. Dipan Merchant, Sr. Advocate with Mr. U.N. Das, Advocate for the respondent.
CORAM
Justice N.K. Sodhi, Presiding Officer
R.N. Bhardwaj, Member
Per: Justice N.K. Sodhi, Presiding Officer (Oral)
The short question that arises for our consideration in this appeal is whether the appellant is entitled to the benefit of fee continuity in terms of paragraph 4 of Schedule III to the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 (for short “the Regulations”). The brief facts giving rise to this appeal are these.
The appellant was registered in the year 1994 as a company under the provisions of Companies Act, 1956. In November 1997 it took over the stock broking business of one Raj Kumar Saraogi who was made a shareholder of the company and also its wholetime director. After taking over the stock broking business, the company applied to the Securities and Exchange Board of India (for short “the Board”) for registration as stock broker and registration was granted to it on November 12, 1997. Rule 3 of the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Rules, 1992 provides that no stock broker or sub-broker shall buy, sell or deal in securities unless he holds a certificate granted by the Board under the Regulations. Rule 4 of these Rules lays down the conditions for the grant of certificate to a stock broker and one of the conditions is that he shall pay the amount of fees for the registration in the manner provided in the Regulations. Regulation 10 of the Regulations mandates that every applicant eligible for grant of a certificate shall pay such fees and in such manner as specified in Schedule III. When we look at Schedule III it provides that every stock broker shall pay registration fee on the basis of his annual turnover. The Regulations were amended in the year 1998 and paragraph 4 in Schedule III was inserted w.e.f. 21/01/1998. This paragraph allows the benefit of fee continuity to a corporate entity and exempts it from payment of fee at the time of its registration for the period for which the erstwhile individual or partnership member, as the case may be, had already paid the same subject, of course, to the fulfillment of the other conditions specified therein. When this paragraph was inserted on 21/01/1998 the appellant as a corporate entity was already in existence carrying on its business as a stock broker. In order to find out whether the appellant is entitled to the benefit of paragraph 4 or not what needs to be examined is whether on the date of insertion of paragraph 4 it (the appellant) satisfied the other requirements of the paragraph. A bare reading of paragraph 4 makes it clear that on the formation of the corporate entity by converting the individual or partnership membership card that entity shall be exempted from payment of fee if the individual whose membership has been converted becomes a wholetime director of the corporate entity and holds a minimum of 40% shares of the paid up equity capital of the corporate entity. These conditions have necessarily to be satisfied as on the date when paragraph 4 was inserted. Admittedly, on 21/1/1998 the appellant had Mr. Raj Kumar Saraogi as its wholetime director (Chairman-cum-Managing Director) but he did not hold 40% shares of the paid up equity capital of the company. Since this condition of paragraph 4 was not satisfied, we are clearly of the view that the appellant was not entitled to the benefit of fee continuity in terms of paragraph 4. In this view the matter the question posed in the earlier part of the order has to be answered in the negative.
No other point was raised.
In the result the appeal fails and the same is dismissed with no order as to costs.
Sd/-
Justice N.K. Sodhi
Presiding Officer
Sd/-
R.N.Bhardwaj
Member