IN THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

 

Appeal No. 407/2004 & 407A/2004

Date of Hearing	19.10.2005
Date of Decision	19.10.2005

 

In the matter of:

 

SMIFS Capital Markets Ltd.	Appellant – Represented by
	Ms. Turshana Thaphiyal, Advocate
Versus
Securities & Exchange Board	Respondent –Represented by
of India	Mr. Vivek Menon, Advocate

 

Coram:

            Justice Kumar Rajaratnam, Presiding Officer

            C. Bhattacharya, Member

            R. N. Bhardwaj, Member

 

Per:  Justice Kumar Rajaratnam, Presiding Officer

 

 

   1.            Appeals are taken up for final disposal with consent of parties.

   2.            The appellant was a merchant banker and sought for renewal of certificate of registration as a merchant banker for the year 2002.  The respondent by an order dated 6.8.2004 held that the appellant is not a fit and proper person under Regulation 3(2)(h) of the SEBI (Criteria for Fit and Proper Person) Regulations, 2004 to be granted renewal of certificate of registration and rejected the application.  The operative portion of the order dated 6.8.2004 is reproduced below:

“In view of the foregoing, pursuant to the powers conferred upon me under Section 19 of Securities and Exchange Board of India Act 1992 read with regulation 6 (h) and10 of SEBI (Merchant Bankers) Regulations, 1992, and regulation 3(2) (h) of the SEBI ( Criteria for Fit and Proper Person) Regulations 2004,  I hereby reject the application submitted by SMIFS Capital Markets Ltd. for renewal of certificate of registration as a Merchant Banker.”

 

   3.             Aggrieved by this order, the appellant reapplied for renewal of certificate which was rejected by the respondent by order dated 23.9.2005.  Both the impugned orders are under challenge in this appeal.  The main grounds for rejecting the renewal application was that certain enquiries were pending against the appellant and its associate companies.

   4.            It was submitted by the appellant that Regulation 6 (h) of the SEBI (Merchant Bankers) Regulations, 1992 and Regulation 3 (2) (h) of SEBI (Criteria for Fit and Proper Person) Regulations, 2004 have no co-relation with each other.  They do not and cannot operate in similar fields and reference or recourse to Regulation 3 (2) (h) is wholly unwarranted when examining the criteria specified in Regulation 6 (h) of the SEBI (Merchant Bankers) Regulations, 1992.  In such circumstances, clause 3(2)(h) of SEBI (Criteria for Fit and Proper Person) Regulations, 2004 cannot be invoked against the applicant as clause 6(h) of the SEBI (Merchant Bankers) Regulations, 1992 is not concerned with the criteria of a ‘fit and proper’ person.

   5.            It is also submitted by way of abundant caution that the appellant is willing to file an affidavit distancing itself from those associate companies which are under investigation. 

   6.            Mr. Menon, the learned counsel for the respondent also submitted that there is a change in the policy decision on this aspect of the matter and that the appellant’s case will be reconsidered sympathetically in the light of the new policy in accordance with law. 

   7.            In these circumstances, the impugned order is set aside.  The appellant is directed to cooperate with the respondent by filing an affidavit within two weeks from the date of the receipt of this order distancing itself from those entities against which enquiries are pending. 

   8.            On filing of the affidavit the respondent is directed to reconsider the matter in the light of the affidavit and in the light of the new policy within a period of 8 weeks from the date of filing of the affidavit in accordance with law.  All contentions left open.

   9.            The appeals are disposed of accordingly.  No order as to costs.

(Pronounced in Court)

 

 

 

Place: Mumbai

Date: 19.10.2005

//SR100527